Leadership & OSHA Case Study

The first article should be related to the topic of Chapter 13: Creating Vision and Strategic Direction.

The second article should be on the topic of Chapter 15: Leading Change.

Be sure that the articles relate to this course material. As you prepare your article critiques, follow the instructions below. If possible, search for articles that have been published within the last five years. To locate scholarly articles on these topic, you will want to access the Online Library databases of your choice and search for a peer-reviewed, scholarly article.

You may want to begin your search by experimenting with the keywords. Below are a few examples of key words:

Leadership

Vision or leadership

Change Human resources (HR)

Planning

Recruiting

Include both of your critiques in one APA-formatted document. Identify your author and title as part of the introduction to your topic; this should not be considered a reference for the article. Here is an example: In reading "The Wayward Cat" by Dr. Seuss, I was intrigued by the way the author addressed…” Begin with an introduction that defines the subject of your critique and the author’s point of view. Defend your point of view by raising specific issues or aspects of the argument. Conclude each critique by summarizing your argument and re-emphasizing your opinion.

You will first need to identify and explain the author's ideas. Include specific passages that support your description of the author's point of view.

Offer your own opinion. Explain what you think about the argument. Describe several points with that you agree or disagree with.

For each of the points you mention, include specific passages from the articles (you may summarize, quote, or paraphrase) that provide evidence for your point of view.

Explain how the passages from the articles support your opinion. Please format the critiques in the following manner: Title Page “Title of Article 1” Critique (use bold type for the title) Body of the Critique/Summary “Title of Article 2” Critique (use bold type for the title) Body of the Critique/Summary References Be sure to put the title of the article in bold for your heading to help your reader distinguish between the two critiques.

Complete both critiques in one document for a paper totaling four pages in length (not including title and reference pages). Your document should be in APA style.

Chapter 13 Creating Vision and Strategic Direction.

421 The Visionary Leader

R

ay Anderson runs a carpet company. If you were looking for an industry to blame for the destruction of our natural environment, the carpet business would rank right up there—massive consumption of fossil fuels, heavy use of water, and tons of debris going into landfills. But several years ago, Ray Anderson had a different vision: What if his company, Interface Inc., could be a model of environmental sustainability? People thought he was crazy—a carpet company a paragon of corporate environmental virtue?

Anderson bucked the conventional thinking and declared that Interface would eliminate its environmental footprint by 2020, and make money in the process. After the initial shock, customers and employees became inspired by the ambitious vision. Investors took a little longer to “see the green light,” but growing sales proved Anderson was onto something. The emotional appeal of Anderson’s vision stirred an almost cult-like following. Today, Interface is a leader in the industry, as well as a leader in environmental sustainability. Between 1994 and 2008, the company cut its use of fossil fuels by 45 percent and its water and landfill use by 80 percent. Sales in the last quarter before the economic slump hit were almost $300 million. The recent downturn has hurt Interface, and leaders have been forced to make some tough business decisions, including laying off 500 people and closing manufacturing operations in Belleville, Ontario.

However, Anderson points out that staying focused on the vision helped Interface weather the last downturn. When the industry lost 37 percent in sales between 2001 and 2004, Interface lost only about half that percentage, thanks in part to its focus on sustainability. Anderson is working overtime to explain the current cost-cutting decisions, listen to employees, respond to their concerns, and keep people directed toward the future.1

One of the most important functions of a leader is to articulate and communicate a compelling vision that will motivate and energize people toward the future. Ray Anderson’s idealistic vision of sustainability inspired and energized people because employees want to work toward something greater than just making money for shareholders. Good leaders are always looking forward, setting a course for the future and getting everyone moving in the same direction. Lorraine Monroe, former principal of the renowned Frederick Douglass Academy in Harlem and founder of the Lorraine Monroe Leadership Institute, refers to a leader as “the drum major, the person who keeps a vision in front of people and reminds them of what they’re about.” People naturally “gravitate toward leaders who have a vision,” Monroe says. “When people see that you love your work, they want to catch your energy.”2

In this chapter, we first provide an overview of the leader’s role in creating the organization’s future. Then, we examine what vision is, the underlying themes that are common to effective visions, and how vision works on multiple levels. The distinction between vision and the organization’s mission is also explained. We then discuss how leaders formulate vision and strategy and the leader’s contribution to achieving the vision and mission.

Strategic Leadership

Superior organizational performance is not a matter of luck. It is determined largely by the choices leaders make. Top leaders are responsible for knowing the organization’s environment, considering what it might be like in 5 or 10 years, and setting a direction for the future that everyone can believe in. Strategic leadership is one of the most critical issues facing organizations.3 Strategic leadership means the ability to anticipate and envision the future, maintain flexibility, think strategically, and work with others to initiate changes that will create a competitive advantage for the organization in the future.4 In a fast-changing world, leaders are faced with a bewildering array of complex and ambiguous information, and no two leaders will see things the same way or make the same choices.

The complexity of the environment and the uncertainty of the future can overwhelm a leader. Thus, many are inclined to focus on internal organizational issues rather than strategic activities. It is easier and more comforting for leaders to deal with routine, operational issues where they can see instant results and feel a sense of control. In addition, many leaders are inundated with information and overwhelmed by minutiae. They may have difficulty finding the quiet time needed for “big-picture thinking.” One study looked at the time executives in various departments spend on long-term, strategic activities and found discouraging results. In the companies studied, 84 percent of finance executives’ time, 70 percent of information technology executives’ time, and 76 percent of operational managers’ time is focused on routine, day-to-day activities.5 Another study found that, on average, senior executives spend less than 3 percent of their energy on building a corporate perspective for the future, and in some companies, the average is less than 1 percent.6 Yet no organization can thrive for the long term without a clear viewpoint and framework for the future.

Exhibit 13.1 illustrates the levels that make up the domain of strategic leadership. Strategic leadership is responsible for the relationship of the external environment to choices about vision, mission, strategy, and their execution.7 At the top of Exhibit 13.1 is a clear, compelling vision of where the organization wants to be in 5 to 10 years. A vision is an aspiration for the future and answers the question “Where are we headed?”8 The vision works in concert with the company’s mission—its core values, purpose, and reason for existence. Mission answers the question “Who are we as an organization?” The next level in Exhibit 13.1, strategy, responds to the question “How do we achieve the vision?” Strategy provides direction for translating the vision into action and is the basis for the development of specific mechanisms to help the organization achieve goals. Execution specifies “What do we do right now?” Strategies are intentions, whereas execution is through the basic organizational architecture (structure, incentives) that makes things happen. Each level of the hierarchy in Exhibit 13.1 supports the level above it. Each part of this framework will be discussed in the remainder of this chapter.

[Leader’s shelf-Insight 13.1 Box Here]

Leadership Vision

A vision is an attractive, ideal future that is credible yet not readily attainable. It is an ambitious view of the future that everyone involved can believe in, one that can realistically be achieved, yet one that offers a future that is better in important ways than what now exists. In the early 1950s, Sony Corporation wanted to “[b]ecome the company most known for changing the worldwide poor-quality image of Japanese products.”9 Since that time, Japanese companies have become known for quality, but in the 1950s this was a highly ambitious goal that fired people’s imaginations and sense of national pride. Sometimes, visions are brief, compelling, and slogan-like, easily communicated to and understood by everyone in the organization. For example, Coca-Cola’s “A Coke within arm’s reach of everyone on the planet,” Canon’s “Beat Xerox,” and Komatsu’s “Encircle Caterpillar” serve to motivate all employees.

Exhibit 13.2 lists a few more brief vision statements that let people know where the organization wants to go in the future. Not all successful organizations have such short, easily communicated slogans, but their visions are powerful because leaders paint a compelling picture of where the organization wants to go. The vision expressed by civil rights leader Martin Luther King, Jr., in his “I Have a Dream” speech is a good example of how leaders paint a vision in words. King articulated a vision of racial harmony, where discrimination was nonexistent, and he conveyed the confidence and conviction that his vision would someday be achieved.

Strong, inspiring visions have been associated with higher organizational performance and greater employee motivation and satisfaction.10 Employees want to know where the organization is going so they know where to focus their energies. When people are encouraged by a picture of what the organization can be in the future, they can help take it there. Consider what happened at one biotechnology firm. The CEO spoke with a consultant about his inability to get agreement among his leadership team regarding problems and priorities. After the consultant asked about the vision for the company, the CEO realized he hadn’t clearly articulated one. He took the team on an offsite meeting specifically to create a vision of where they wanted the company to go. With this vision as a guide, it was easy to resolve specific issues because everyone knew the direction.11

Leaders in nonprofit organizations also create visions so people know where the organization wants to go. For example, leaders at the Greater Chicago Food Depository have a vision of transforming the nonprofit agency from an organization that just feeds the hungry to one that helps end hunger. The agency sponsors an intense 12-week program aimed at teaching low-income, low-skilled workers the basics of cooking, along with life skills such as punctuality, teamwork, commitment, and personal responsibility, with the goal of landing each person a good job. Poverty is a big problem, and its causes are many and complex, but leaders know people can’t begin to move up unless they have jobs. The vision of helping people change their lives has energized employees in a way that simply providing food to low-income clients never did.12 Vision is just as important for nonprofit agencies like the Greater Chicago Food Depository, the United Way, and the Salvation Army as it is for businesses such as Coca-Cola, Google, or General Electric. Indeed, nonprofits sometimes need vision even more than do businesses, since they operate without the regular feedback provided by profit and loss.13

In Exhibit 13.3, vision is shown as a guiding star, drawing everyone along the same path toward the future. Vision is based in the current reality but is concerned with a future that is substantially different from the status quo.14 Taking the group or organization along this path requires leadership. Compare this to rational management (as described in Chapter 1), which leads to the status quo.

What Vision Does

Vision works in a number of important ways. An effective vision provides a link between today and tomorrow, serves to energize and motivate employees toward the future, provides meaning for people’s work, and sets a standard of excellence and integrity in the organization.15

Vision Links the Present to the Future Vision connects what is going on right now with what the organization aspires to. A vision is always about the future, but it begins with the here and now. At Google, employees are guided by a vision of unifying data and information around the world, one day totally obliterating language barriers via the Internet.16 They create services that meet current needs, but they also strive to envision and create products and services that encourage other, broader applications.

In organizations, the pressures to meet deadlines, make the big sale, solve immediate problems, and complete specific projects are very real. Some have suggested that leaders need “bifocal vision,” the ability to take care of the needs of today and meet current obligations while also aiming toward dreams for the future.17 The ability to operate on both levels can be seen in a number of successful companies, such as DuPont. Top executives routinely review short-term operational goals with managers throughout the company, reflecting a focus on the present. However, DuPont has succeeded over the long haul because of its leaders’ ability to keep an eye on the future and shift gears quickly to take advantage of new opportunities. Since its beginning, DuPont’s business portfolio has shifted from gunpowder to specialty chemicals, and today, the company is moving into biotechnology and life sciences.18

Vision Energizes People and Garners Commitment People want to feel enthusiastic about their work. Many people commit their time and energy voluntarily to projects they believe in—a political campaign, community events, or environmental causes, for example. These same people often leave their energy and enthusiasm at home when they go to work, because they don’t have anything to inspire them. A study from Hay Group based on surveys of 1.2 million employees suggests that one reason organizations lose good employees is the lack of a clear vision that provides a sense of direction.19 In addition, people are not generally willing to make emotional commitments just for the sake of increasing profits. Vision needs to transcend the bottom line because people are willing, and even eager, to commit to something truly worthwhile, something that makes life better for others or improves their communities.20 Consider Henry Ford’s original vision for Ford Motor Company:

I will build a motor car for the great multitude. . . . It will be so low in price that no man making a good salary will be unable to own one and enjoy with his family the blessings of hours of pleasure in God’s open spaces. . . . When I’m through, everybody will be able to afford one, and everyone will have one. The horse will have disappeared from our highways, the automobile will be taken for granted [and we will give many people] employment at good wages.21

Employees were motivated by Ford’s vision because they saw an opportunity to make life better for themselves and others.

[Leader’s shelf-Insight 13.2 Box Here]

Vision Gives Meaning to Work People also need to find dignity and meaning in their work. Even employees performing routine tasks can find pride in their work when they have a larger purpose for what they do. For example, an insurance clerk who thinks of her job as helping victims of fire or burglary put their lives back in order will feel very differently than one who thinks of his job as “processing insurance claims.”22 “People want to accomplish great things,” advises former UPS CEO Michael L. Eskew. “They want to make a difference. Leaders need to say ‘This is where we are going,’ and then, ‘this is why we need you.’”23 People are drawn to companies that offer them a chance to do something meaningful. Today, prospective employees often ask about a company’s vision when interviewing for a job because they want to know what the organization aims for and how, or whether, they will fit in.

Vision Establishes a Standard of Excellence and Integrity A powerful vision frees people from the mundane by providing them with a challenge that requires them to give their best. In addition, vision provides a measure by which employees can gauge their contributions to the organization. Most workers welcome the chance to see how their work fits into the whole. Think of how frustrating it is to watch a movie when the projector is out of focus. Today’s complex, fast-changing business environment often seems just like that—out of focus.24 A vision is the focus button. It clarifies an image of the future and lets people see how they can contribute. A vision presents a challenge—asking people to go where they haven’t gone before. A powerful vision that defies conventional thinking is one of the key traits shared by many companies that rank on BusinessWeek’s BW50 list of high-performing organizations. Gilead Sciences landed high on the list for four consecutive years thanks to leadership vision.

[In The Lead Box 1 Here]

Visions such as the one at Gilead Sciences clarify and connect to the core values and ideals of the organization and thus set a standard of integrity for employees. A good vision brings out the best in people by illuminating important values, speaking to people’s hearts, and letting them be part of something bigger than themselves. Because good visions present a challenge, they encourage people to be creative, take risks, think in unconventional ways, and find new approaches. This chapter’s Consider This box discusses three qualities a powerful vision can inspire.

Common Themes of Vision

Five themes are common to powerful, effective visions: they have broad, widely shared appeal; they help organizations deal with change; they encourage faith and hope for the future; they reflect high ideals; and they define both the organization’s destination and the basic rules to get there.

Vision Has Broad Appeal Although it may seem obvious that a vision can be achieved only through people, many visions fail to adequately involve employees. Isolated top leaders may come up with a grand idea that other employees find ridiculous, or they might forget that achieving the vision requires understanding and commitment throughout the organization. For example, in 1994, most people thought Ray Anderson’s idea of turning a carpet company into an environmental leader was insane. If he had not been able to involve managers, engineers, employees, customers, and investors in the vision, it could never become a reality. The vision cannot be the property of the leader alone.26 The ideal vision is identified with the organization as a whole, not with a single leader or even a top leadership team. It “grabs people in the gut” and motivates them to work toward a common end.27 It allows each individual to act independently but in the same direction.

[Consider This Box Here]

Vision Deals with Change Effective visions help the organization achieve bold change. The National Institute for Learning Disabilities existed for 25 years, providing services to a narrow segment of the educational market. Then, leaders formulated a bold vision for broadening the scope of the organization and serving a million students by 2020. The so-called “2020 Vision” presented a tremendous challenge that required leaders and employees to stretch their thinking and change how they provide services.28 Change can be frightening, but a clear sense of direction helps people face the difficulties and uncertainties involved in the change process. When employees have a guiding vision, everyday decisions and actions throughout the organization respond to current problems and challenges in ways that move the organization toward the future rather than maintain the status quo.

Vision Encourages Faith and Hope Vision exists only in the imagination—it is a picture of a world that cannot be observed or verified in advance. The future is shaped by people who believe in it, and a powerful vision helps people believe that they can be effective, that there is a better future they can move to through their own commitment and actions. Vision is an emotional appeal to our fundamental human needs and desires—to feel important and useful, to believe we can make a real difference in the world.29 For example, John F. Kennedy’s vision for NASA to send a man to the moon by the end of the 1960s was so powerful that hundreds of thousands of people throughout the world believed in a future they couldn’t see.30

Vision Reflects High Ideals Good visions are idealistic. Visions that portray an uplifting future have the power to inspire and energize people. When Kennedy announced the “man on the moon” vision, NASA had only a small amount of the knowledge it would need to accomplish the feat. Yet in July 1969, the vision became a reality. William F. Powers, who worked at NASA during the 1960s, later helped Ford Motor Company develop an idealistic vision for the world’s first high-volume, aerodynamically styled car that featured fuel economy (the 1980s Taurus). It was a big risk for Ford at a time when the company was down and out. But leaders portrayed this as a chance not only to save the company but also to establish a whole new path in automotive engineering, which tapped into employees’ imaginations and idealism.31

Vision Defines the Destination and the Journey A good vision for the future includes specific outcomes that the organization wants to achieve. It also incorporates the underlying values that will help the organization get there. For example, a private business school might specify certain outcomes such as a top-20 ranking, placing 90 percent of students in summer internships, and getting 80 percent of students into jobs by June of their graduating year. Yet in the process of reaching those specific outcomes, the school wants to increase students’ knowledge of business, ethical values, and teamwork, as well as prepare them for lifelong learning. Additionally, the vision may espouse underlying values such as no separation between fields of study or between professors and students, a genuine concern for students’ welfare, and adding to the body of business knowledge. A good vision includes both the desired future outcomes and the underlying values that set the rules for achieving them.

A Vision Works at Multiple Levels

Most of the visions we have talked about so far are for the company as a whole. However, divisions, departments, and individuals also have visions, which are just as important and powerful. Successful individuals usually have a clear mental picture of their vision and how to achieve it. People who do not have this clear vision of the future have less chance of success. Three young Pepperdine University graduates started an organization to help other young people find and pursue their personal vision.

[In The Lead Box 2 Here]

Roadtrip also reminds people that making an initial career choice is just one aspect of a personal vision that will grow and change over time. Some successful organizations ask employees to write a personal vision statement because leaders know that people who have a vision of where they want their lives to go are more effective. In addition, this enables leaders to see how an employee’s personal vision and the team or organizational vision can contribute to one another.

Organizational visions grow and change as well. Within organizations, top leaders develop a vision for the organization as a whole, and at the same time a project team leader five levels beneath the CEO can develop a vision with team members for a new product they are working on. Leaders of functional departments, divisions, and teams can use vision with the same positive results as do top leaders. The vision becomes the common thread connecting people, involving them personally and emotionally in the organization.33 In innovative companies, every group or department creates its own vision, as long as the vision is in line with the overall company’s direction.

When every person understands and embraces a vision, the organization becomes self-adapting. Although each individual acts independently, everyone is working in the same direction. In the new sciences, this is called the principle of self-reference. Self-reference means that each element in a system will serve the goals of the whole system when the elements are imprinted with an understanding of the whole. Thus, the vision serves to direct and control people for the good of themselves and the organization.

To develop a shared vision, leaders share their personal visions with others and encourage others to express their dreams for the future. This requires openness, good listening skills, and the courage to connect with people on an emotional level. A leader’s ultimate responsibility is to be in touch with the hopes and dreams that drive employees and find the common ground that binds personal dreams into a shared vision for the organization. As one successful top leader put it, “My job, fundamentally, is listening to what the organization is trying to say, and then making sure it is forcefully articulated.”34 Another successful leader refers to leadership as “discovering the company’s destiny and having the courage to follow it.”35

Mission

Mission is not the same thing as a company’s vision, although the two work together. The mission is the organization’s core broad purpose and reason for existence. It defines the company’s core values and reason for being, and it provides a basis for creating the vision. Whereas vision is an ambitious desire for the future, mission is what the organization “stands for” in a larger sense.

What Mission Does

Whereas visions grow and change, the mission persists in the face of changing technologies, economic conditions, or other environmental shifts. It serves as the glue that holds the organization together in times of change and guides strategic choices and decisions about the future. The mission defines the enduring character—the spiritual DNA—of the organization and can be used as a leadership tool to help employees find purpose in their work.36 Companies with strong missions that give people purpose, such as Medtronic’s “To restore people to full life and health” or Liberty Mutual Company’s “Helping people live safer, more secure lives” typically attract better employees, have better relationships with external parties, and perform better in the marketplace over the long term.37 Particularly in today’s environment, people are drawn to companies that have a clear purpose that goes beyond enhancing shareholder wealth. The Leader’s Bookshelf describes some values and operating principles of companies that believe their purpose is not to enrich shareholders but to serve the greater good.

Recall the discussion of intrinsic rewards from Chapter 8. When people connect their jobs to a higher cause or purpose, the work itself becomes a great motivator. The Gallup organization’s Q12 study, also discussed in Chapter 8, has found that when employees believe the company’s mission makes their job important, they are typically more engaged with their work, feel a greater sense of pride and loyalty, and are more productive. Exhibit 13.4 compares the Gallup results for those who agree that the mission makes their job important to those who do not feel that the mission of the company makes their job important. The differences are quite striking. For example, 60 percent of respondents who agreed that the mission makes their job important reported feeling engaged with their work, whereas none of the respondents who disagreed felt engaged with their work. Sixty-six percent would recommend their company’s products or services, compared to only 20 percent of those who did not believe the mission made their job important.38

[Leader’s Bookshelf Here]

Typically, the mission is made up of two critical parts: the core values and the core purpose. The core values guide the organization “no matter what.” As Ralph Larsen, former CEO of Johnson & Johnson, explained it, “The core values embodied in our Credo might be a competitive advantage, but that is not why we have them. We have them because they define for us what we stand for, and we would hold them even if they became a competitive disadvantage in certain situations.”39 Johnson & Johnson’s core values led the company, for example, to voluntarily remove Tylenol from the market after product tampering led to the cyanide poisoning of some Tylenol capsule users, even though this act cost the company more than $100 million.

The mission also includes the company’s core purpose. The core values and core purpose are frequently expressed in a mission statement. Exhibit 13.5 shows the vision, mission, and core values of DuPont Canada. Consider how DuPont’s specific vision grows out of the company’s mission and works with it.

A Framework for Noble Purpose

An effective mission statement doesn’t just describe products or services; it captures people’s idealistic motivations for why the organization exists. Most successful companies have missions that proclaim a noble purpose of some type, such as Mary Kay’s “to enrich the lives of women,” or Wal-Mart Stores’ mission “to give ordinary folk the chance to buy the same things as rich people.”40

Leaders are responsible for framing a noble purpose that inspires and leads followers to high performance and helps the organization maintain a competitive advantage. People like to have a sense that what they are doing matters and makes a positive difference in the world.

Exhibit 13.6 describes four basic approaches leaders take in framing an organizational purpose that can tap into people’s desire to contribute and feel that their work is worthwhile.41 Each of these approaches is described in more detail in the following paragraphs.

Discovery Many people are inspired by the opportunity to find or create something new. Discovery for its own sake can serve as a noble purpose, as it does for employees at Google, where people are energized by the psychic rewards they get from working on intellectually stimulating and challenging technical problems.42 As another example, leaders at Samsung Electronics reenergized the company by focusing employees on discovery rather than imitation, transforming Samsung into a world-class innovator rather than a manufacturer known for cheap, low-quality knockoffs. This shift in purpose led to amazing results at Samsung.43 This type of purpose inspires people to see the adventure in their work and experience the joy of a pioneering or entrepreneurial spirit.

Excellence With this approach, rather than emphasizing discovery, leaders focus people on being the best, both on an individual and an organizational level. Apple, for instance, didn’t invent the MP3 player or the smartphone, but instead focused on making the best possible version of these products.44 In addition, excellence is defined by the work itself rather than by customers. Indeed, organizations that pursue excellence would rather turn customers away than compromise their quality. Consider that Apple has always built high-quality, cleverly designed computers, yet it holds less than 10 percent of the personal computer market. Leaders would like to increase their share of the market, but they aren’t willing to sacrifice their commitment to high quality and what they consider superior technology.45 In companies with excellence as a guiding purpose, managers and employees are treated as valuable resources and provided with support to perform at their peak. People are motivated by the opportunity to experience intrinsic rewards and personal fulfillment.

Altruism Many nonprofit organizations are based on a noble purpose of altruism because they emphasize serving others, but businesses can use this approach as well. For example, leaders at Dollar General stress the purpose of giving low-income people a good deal, not just making sales and profits. Even a car manufacturer can have a noble purpose, as leaders at Honda have shown.

[In The Lead Box 3 Here]

Honda’s mission clearly places it in the category of altruism as a guiding purpose. Any company that puts a high premium on customer service can be considered to fall in this category as well. Marriott, for instance, encapsulates its purpose in the slogan, “The Spirit to Serve.”47 The basis of action for this type of purpose is to increase personal happiness. Most people feel good when they are doing something to help others or make their communities or the world a better place.

Heroism The final category, heroism, means the company’s purpose is based on being strong, aggressive, and effective. Companies with this basis of noble purpose often reflect almost an obsession with winning. Bill Gates imbued Microsoft with a goal of putting the Windows operating system into every personal computer, for example.48 At General Electric, former CEO Jack Welch wanted the company to strive to be number one or number two in each industry in which it did business. As another example, Southwest Airlines was founded with a heroic goal of winning against much larger competitors such as American and Delta. With this approach, the basis of action is people’s desire to achieve and to experience self-efficacy, as described in Chapter 8. People want to feel capable of being effective and producing results.

Companies that remain successful over the long term have top executives who lead with a noble purpose. A well-chosen noble purpose taps into the emotions and instincts of employees and customers and can contribute to better morale, greater innovativeness, and higher employee and organizational performance.

Strategy in Action

Strong missions that reflect a noble purpose and guiding visions are both important, but they are not enough alone to make strong, powerful organizations. For organizations to succeed, they need ways to translate vision, values, and purpose into action, which is the role of strategy. Strategic management refers to the set of decisions and actions used to formulate and implement specific strategies that will achieve a competitively superior fit between the organization and its environment so as to achieve organizational goals.49

It is the leader’s job to find this fit and translate it into action. When leaders link vision and strategic action, they can make a real difference for their organization’s future. Research has shown that strategic thinking and planning for the future can positively affect a company’s performance and financial success.50 One study found that as much as 44 percent of the variance in profitability of major firms can be attributed to strategic leadership.51

Deciding How to Achieve the Vision

Strategy can be defined as the general plan of action that describes resource allocation and other activities for dealing with the environment and helping the organization attain its goals and achieve the vision. In formulating strategy, leaders ask questions such as “Where is the organization now? Where does the organization want to be? What changes and trends are occurring in the competitive environment? What courses of action can help us achieve our vision?”

Developing effective strategy requires actively listening to people both inside and outside the organization, as well as examining trends and discontinuities in the environment that can be used to gain an edge. Rather than reacting to environmental changes, strategic leaders study the events that have already taken place and act based on their anticipation of what the future might be like.52 An example is Progressive Insurance, which was the first to offer rate quotes online. Other companies had the same information about the growth of personal computers and the Internet, but they didn’t interpret it in the same way or formulate the same strategy for taking advantage of the new technology. Good leaders anticipate, look ahead, and prepare for the future based on trends they see in the environment today, which often requires radical thinking.

Innovative thinking carries a lot of risk. Sometimes leaders have to shift their strategy several times before they get it right.53 In addition, strategy necessarily changes over time to fit shifting environmental conditions. To improve the chances for success, leaders develop strategies that focus on three qualities: core competence, developing synergy, and creating value for customers.

An organization’s core competence is something the organization does extremely well in comparison to competitors. Leaders try to identify the organization’s unique strengths—what makes their organization different from others in the industry. L.L. Bean succeeds with a core competence of excellent customer service and a quality guarantee. A customer can return a purchase at any time and get a refund or exchange, no questions asked. One story told about the company is that a manager approached a young boy with his mother and commented that his L.L. Bean jacket was frayed at the sleeves and collar. The mother commented that it was no wonder, considering how much he had worn it, but the manager said, “That shouldn’t happen; we need to replace that for you.”54

Synergy occurs when organizational parts interact to produce a joint effect that is greater than the sum of the parts acting alone. As a result the organization may attain a special advantage with respect to cost, market power, technology, or employee skills. One way companies gain synergy is through alliances and partnerships. North General Hospital, a small community hospital in Harlem that caters mostly to the poor and elderly, had lost money every year since it was founded in 1979—until 2005, when leaders focused on a new strategy that included an alliance with Mount Sinai Medical Center, one of New York City’s most prominent teaching hospitals. In return for an annual fee, North General uses Mount Sinai physicians and surgeons who perform highly specialized procedures and treat specific diseases that affect African-Americans in high rates. The deal boosts revenue for Mount Sinai, as well, and brings in more patients because North General acts as a referral service for patients with complex medical issues.55

Focusing on core competencies and attaining synergy help companies create value for their customers. Value can be defined as the combination of benefits received and costs paid by the customer.56 For example, Panera Bread doesn’t have the lowest costs for sandwiches and other food and drink products, but it works hard to create an environment where people want to spend time. “If you give people food they want, in an environment that they want, they will spend a dollar or two more, they will go out of their way for it,” says CEO Ron Shaich.57 Delivering value to the customer is at the heart of strategy.

Strategy formulation integrates knowledge of the environment, vision, and mission with the company’s core competence in such a way as to attain synergy and create value for customers. When these elements are brought together, the company has an excellent chance to succeed in a competitive environment. But to do so, leaders have to ensure that strategies are executed—that actual behavior within the organization reflects the desired direction.

Deciding How to Execute

Strategy execution means using specific mechanisms, techniques, or tools for directing organizational resources to accomplish strategic goals. This is the basic architecture for how things get done in the organization. Strategy execution, sometimes called implementation, is the most important as well as the most difficult part of strategic management, and leaders must carefully and consistently manage the execution process to achieve results.58 One survey found that only 57 percent of responding firms reported that managers successfully implemented the new strategies they had devised over the past three years.59 Other research has estimated that as much as 70 percent of all business strategies never get implemented, reflecting the complexity of strategy execution.60

Strategy execution involves using several tools or parts of the organization that can be adjusted to put strategy into action. Strong leadership is one of the most important tools for strategy execution. Followers need line of sight to the organization’s strategic objectives, which means they understand the goals and how their actions will contribute to achieving them.61 Leaders create the environment that determines whether people understand and feel committed to achieving the company’s strategic objectives. When leaders clearly communicate a vision, spell out specific strategic goals, openly share information, and involve employees in making decisions that affect their jobs and the organization, people can see how their individual actions contribute to achieving the larger goals.62 In addition, open communication and employee involvement increase trust, and people who trust their leaders are typically more supportive of strategy and put forth more effort to implement strategic decisions.63

Strategy is also executed through organizational elements such as structural design, pay or reward systems, budget allocations, and organizational rules, policies, or procedures. Leaders make decisions about changes in structure, systems, policies, and so forth, to support the company’s strategic direction. They should take care, however, that these decisions promote ethical and socially responsible behavior on the part of employees rather than encouraging them to meet the strategic goals at any price. For instance, Wells Fargo leaders have been praised for a growth strategy that included goals of expanding financial services to minority customers and neighborhoods. However, recent allegations shed a much more negative light on the bank’s leaders. Former employees have said the company offered rewards to loan officers to aggressively push subprime mortgages in minority communities. One claimed the bank gave bonuses to loan officers who steered minority borrowers who should have qualified for prime loans toward higher-interest subprime loans instead.64

A more positive example comes from The Home Depot. CEO Frank Blake has loosened rules, revised procedures, and shifted reward systems to emphasize quality customer service in support of a strategy that takes Home Depot back to its roots as a source of not only products but also help and information. Former CEO Bob Nardelli’s strategy of dominating the wholesale housing-supply business created fast growth but also led to low morale and poor customer service. Blake has sold off the supply unit to invest in an “army of orange aprons” at the retail stores.65

Leaders make decisions every day—some large and some small—that support company strategy. Exhibit 13.7 provides a simplified model for how leaders make strategic decisions. The two dimensions considered are whether a particular choice will have a high or low strategic impact on the business and whether execution of the decision will be easy or difficult. A change that both produces a high strategic impact and is easy to execute would be a leader’s first choice for putting strategy into action. For example, leaders at Payless Shoe Source shifted the company’s strategy to try to appeal to young, fashion-conscious women with trendier shoes at reasonable prices, or as CEO Matt Rubel put it, to “democratize fashion.” One of the first steps leaders took was to give the stores a new look. The tall, crowded wire racks were replaced with low countertops and displays arranged by fashion rather than by size. The walls are curved to give a feeling of movement and energy. Even the lighting is strategic. Modern white ceiling lamps brighten the whole store and accent lamps highlight the higher-fashion items. “It makes a $12 shoe look like a $20 shoe,” says Rubel. The redesign of stores was easy to execute and is already having a big strategic impact. As one fashion-conscious shopper said, “Everything looks so much nicer. Is this Payless?”66

Some strategic decisions, however, are much more difficult to execute. For example, pursuing growth through mergers and acquisitions can present difficulties of blending production processes, accounting procedures, corporate cultures, and other aspects of the organizations into an effectively functioning whole. Structural reorganization, such as a shift to horizontal teams or breaking a corporation into separate divisions, is another example of a high-risk decision. Leaders frequently initiate major changes despite the risks and difficulties because the potential strategic payoff is very high.

Leaders also sometimes pursue activities that have a low strategic impact but which are relatively easy to execute. Incremental improvements in products, work processes, or techniques are examples. Over time, incremental improvements can have an important effect on the organization. In addition, small changes can symbolize improvement and success to people within the organization. It may be important for leaders to produce quick, highly visible improvements to boost morale, keep people committed to larger changes, or keep followers focused on the vision. For example, the manager of a purchasing department wanted to re-engineer the purchasing process to increase efficiency and improve relationships with suppliers. He wanted requisitions and invoices to be processed within days rather than the several weeks it had been taking. Employees were skeptical that the department could ever meet the new standards and pointed out that some invoices currently awaiting processing were almost two months old. The manager decided to make some simple revisions in the flow of paperwork and employee duties, which enabled the department to process all the old invoices so that no remaining invoice was more than a week old. This “small win” energized employees and helped keep them focused on the larger goal.67 The positive attitude made execution of the larger change much smoother.

The final category shown in Exhibit 13.7 relates to changes that are both difficult to execute and have low strategic impact. An illustration of a decision in this category was the attempt by new management at a highly successful mail-order clothing company to implement teams. In this case, the decision was not made to support a new strategic direction but simply to try out a new management trend—and it was a miserable failure that cost the organization much time, money, and employee goodwill before the teams were finally disbanded.68 Effective leaders try to avoid making decisions that fall within this category.

The Leader’s Contribution

Although good leadership calls for actively involving everyone, leaders are still ultimately responsible for establishing direction through vision and strategy. When leadership fails to provide direction, organizations flounder. General Motors provides both a positive and a negative example.

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GM lost its way because leaders couldn’t agree on a clear direction for the organization. Innovation, once part of the company’s DNA, got pushed to the back burner in favor of efficiency, but without a strategic focus the company’s resources were spread way too thin. For instance, Saturn was originally a success, but the company failed to introduce any new models for five years, effectively starving the promising division. GM filed for Chapter 11 bankruptcy in early June 2009, and new leadership is focusing resources on just four core brands to try to save the once-renowned automaker.70

To keep organizations competitive, leaders consciously adopt a focused vision and strategy and make sure everyone’s activities move the organization in the right direction.

Stimulating Vision and Action

In the waiting lounge of a fine lakeside restaurant, a sign reads, “Where there is no hope in the future, there is no power in the present.” The owner explains its presence there by telling the story of how his small, picturesque village with its homes and businesses was sacrificed to make way for a flood-control project. After losing their fight to reverse the decision, most business leaders simply let their businesses decline and die. Soon, the only people who came to the village did so to eat at the cheery little diner, whose owner became the butt of jokes because he continued to work so hard. Everyone laughed when he chose to open a larger and fancier restaurant on the hill behind the village. Yet, when the flood-control project was finally completed, he had the only attractive restaurant on the edge of a beautiful, newly constructed lake that drew many tourists. Anyone could have found out, as he did, where the edge of the lake would be, yet most of the business owners had no vision for the future. The restaurant owner had a vision and he took action on it.

Hopes and dreams for the future are what keep people moving forward. However, for leaders to make a real difference, they have to link those dreams with strategic actions. Vision has to be translated into specific goals, objectives, and plans so that employees know how to move toward the desired future. An old English churchyard saying applies to organizations as it does to life:

Life without vision is drudgery.

Vision without action is but an empty dream.

Action guided by vision is joy and the hope of the earth.71

Exhibit 13.8 illustrates four possibilities of leadership in providing direction. Four types of leaders are described based on their attention to vision and attention to action. The person who is low both on providing vision and stimulating action is uninvolved, not really a leader at all. The leader who is all action and little vision is a doer. He or she may be a hard worker and dedicated to the job and the organization, but the doer is working blind. Without a sense of purpose and direction, activities have no real meaning and do not truly serve the organization, the employees, or the community. The dreamer, on the other hand, is good at providing a big idea with meaning for self and others. This leader may effectively inspire others with a vision, yet he or she is weak on executing strategic action. The vision in this case is only a dream, a fantasy, because it has little chance of ever becoming reality. To be an effective leader, one both dreams big and transforms those dreams into significant strategic action, either through one’s own activities or by hiring other leaders who can effectively execute the vision and strategy.

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How Leaders Decide

To determine strategic direction for the future, leaders look inward, outward, and forward. Leaders scan both the internal and external organizational environment to identify trends, threats, and opportunities for the organization.

Organizations need both a broad and inspiring vision and an underlying plan for how to achieve it. To decide and map a strategic direction, leaders strive to develop industry foresight based on trends in technology, demographics, government regulation, values, and lifestyles that will help them identify new competitive advantages. One approach leaders take in setting a course for the future is through hard analysis. Situation analysis, for example, includes a search for SWOT—strengths, weaknesses, opportunities, and threats that affect organizational performance. Leaders using situation analysis obtain external information from a variety of sources, such as customers, government reports, suppliers, consultants, or association meetings. They gather information about internal strengths and weaknesses from sources such as budgets, financial ratios, profit and loss statements, and employee surveys. Another formula often used by leaders is a five-force analysis developed by Michael Porter, who studied a number of businesses and proposed that strategy is often the result of five competitive forces: potential new entrants into an industry; the bargaining power of buyers; the bargaining power of suppliers; the threat of substitute products; and rivalry among competitors. By carefully examining these five forces, leaders can develop effective strategies to remain competitive.

Vision and strategy have to be based on a solid factual foundation, but too much rationality can get in the way of creating a compelling vision. Leaders do conduct rational analysis, but successful visions also reflect their personal experiences and understandings.72 When leaders rely solely on formal strategic planning, competitor analysis, or market research, they miss new opportunities. Consider that when Ted Turner first talked about launching a 24-hour news and information channel in the 1970s, many dismissed him as delusional. Every source of conventional wisdom, from market research to broadcast professionals, said the vision was crazy and bound to fail. Yet Turner looked at emerging social and demographic trends, listened to his intuition, and launched a global network that generates 35 percent gross margins.73

To formulate a vision, leaders also look inward to their hopes and dreams, and they listen to the hopes and dreams of followers. Foresight and the ability to see future possibilities emerge not just from traditional strategic planning tools and formulas, but from curiosity, instinct and intuition, emotions, deep thinking, personal experience, and hope. To connect with people’s deeper yearning for something great, vision can transcend the rational. Although it is based on reality, it comes from the heart rather than the head.

Leadership Essentials

· Leaders establish organizational direction through vision and strategy. They are responsible for studying the organization’s environment, considering how it may be different in the future, and setting a direction everyone can believe in. The shared vision is an attractive, ideal future for the organization that is credible yet not readily attainable. A clear, powerful vision links the present and the future by showing how present actions and decisions can move the organization toward its long-range goals. Vision energizes employees and gives them an inspiring picture of the future to which they are eager to commit themselves. The vision can also give meaning to work and establish a standard of excellence by presenting a challenge that asks all workers to give their best.

· The mission includes the company’s core values and its core purpose or reason for existence. Visions for the future change, whereas the mission should persist, as a reflection of the enduring character of the organization. Effective leaders frame a noble purpose that inspires followers and helps the organization maintain a competitive advantage. To frame an organizational purpose that helps people find their work meaningful, leaders can choose among four basic concepts as the basis of purpose: discovery, excellence, altruism, and heroism.

· Strategic management is the serious work of figuring out how to translate vision and mission into action. Strategy is a general plan of action that describes resource allocation and other activities for dealing with the environment and helping the organization reach its goals. Like vision, strategy changes, but successful companies develop strategies that focus on core competence, develop synergy, and create value for customers. Strategy is executed through the systems and structures that are the basic architecture for how things get done in the organization.

· Leaders decide on direction through rational analysis as well as intuition, personal experience, and hopes and dreams. Leaders make a real difference for their organization only when they link vision to strategic action, so that vision is more than just a dream. Superior organizational performance is not a matter of luck. It is determined by the decisions leaders make.

Chapter 15: Leading Change

486 Riverside Pediatric Associates

Open innovation

including customers, strategic partners, suppliers, and other outsiders directly in the innovation process

O

ver a recent two-year period, financial services companies laid off 400,000 employees in the United States, with nearly 150,000 of those being let go in the fourth quarter of 2008 alone, when the economic crisis hit its peak.1 Some banks, like IndyMac, were seized and restructured by the U.S. Federal Deposit Insurance Corporation (FDIC). Others, like the giant Citigroup, remained intact but received billions of dollars of bailout funds from the U.S. government—and the scrutiny and meddling that came with it. The long-term future of the firm that a decade ago rewrote the rules of finance by creating a global financial supermarket is uncertain. The one thing that is clear is that Citigroup has to change. After decades of expansion, Citi’s leaders are now trying to shrink the company to a manageable size. They are returning to the use of the name Citicorp, and going back to the core business of banking. “Citigroup . . . was put together in a random fashion that wasn’t market based,” said one banking expert. Citi’s executives, currently led by CEO Vikram Pandit (under pressure from the FDIC to step down), are struggling to cut costs, decrease the percentage of risky assets, get the right mix of leadership talent, and come up with a focused strategy to get the organization back on track.2

Citigroup is not alone. Most companies in the financial services industry are facing a need for dramatic change after the mortgage crisis and the Wall Street meltdown. Complicating the challenge for the big U.S. financial firms is that many expert managers and traders are turning away from these established firms to take their chances with innovative start-up companies or foreign banks that don’t face the tighter government regulations being imposed on the big institutions.3

This chapter explores how leaders in companies such as Citigroup facilitate change, creativity, and innovation. We first look briefly at the need for change in today’s organizations and examine a step-by-step framework for leading change. We explore the appreciative inquiry technique and how it can be used to lead both major changes and ongoing, everyday change. Next, the chapter examines how leaders facilitate innovation by fostering creative people and organizations. The final sections of the chapter consider why people resist change and how leaders can overcome resistance and help people cope with the potentially negative consequences of change.

Change or Perish

Recall from our definition used throughout this book that leadership is about change rather than stability. In recent years, though, the pace of change has increased dramatically, presenting significant challenges for leaders trying to keep pace with shifts in the external environment.

Change is necessary if organizations are to survive and thrive, and the sharp downturn in the economy is forcing leaders in all industries to take a fresh look at how they do business. The recent turmoil is not only pressuring leaders to rethink the economics of their business but has also brought changes in social attitudes that require new leadership responses.4 From big, highly visible corporations such as Citigroup and General Motors, to government agencies such as the Securities and Exchange Commission (SEC) and the Central Intelligence Agency (CIA), to small companies, colleges and universities, and nonprofit organizations, the need for change is on every leader’s mind. The pressing need for change management is reflected in the fact that many organizations are hiring “transformation officers” who are charged with radically rethinking and remaking either the entire organization or major parts of it.5 Even the U.S. Army has undergone massive changes in recent years to fight a new kind of war. Rather than launching an all-out assault, the Army is struggling to learn that “the more force you use when battling insurgents, the less effective you are,” as stated in the organization’s new counterinsurgency doctrine.6

As illustrated in Exhibit 15.1, environmental forces such as rapid technological changes, a globalized economy, shifting geopolitical forces, increasing government regulation, changing markets, the growth of e-business, and the swift spread of information via the Internet are creating more threats as well as more opportunities for organizational leaders. A big problem for today’s organizations is the failure to adapt to all these changes in the environment. Although there are many reasons for this problem, a primary solution is better change leadership. Leaders serve as the role models for change and provide the motivation and communication to keep change efforts moving forward. Strong, committed leadership is crucial to successful change, and research has identified some key characteristics of leaders who can accomplish successful change projects:7

· They define themselves as change leaders rather than people who want to maintain the status quo.

· They demonstrate courage.

· They believe in employees’ capacity to assume responsibility.

· They are able to assimilate and articulate values that promote adaptability.

· They recognize and learn from their own mistakes.

· They are capable of managing complexity, uncertainty, and ambiguity.

· They have vision and can describe their vision for the future in vivid terms.

Washington, D.C., Metropolitan Police Chief Cathy Lanier illustrates many of the characteristics of a change leader.

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Change does not happen easily, but good leaders throughout the organization can facilitate change and help their organizations adapt to external threats and new opportunities. One does not need to be a top leader to be a change leader. In the following section, we examine a framework for leading change, and later in the chapter we will give some tips for how leaders can overcome resistance to change.

A Framework for Leading Change

When leading a major change project, it is important for leaders to recognize that the change process goes through stages, each stage is important, and each may require a significant amount of time. Leaders are responsible for guiding employees and the organization through the change process.

Exhibit 15.2 presents an eight-stage model of planned change developed by John Kotter.9 To successfully implement change, leaders pay careful attention to each stage. Skipping stages or making critical mistakes at any stage can cause the change process to fail.

1. At stage 1, leaders establish a sense of urgency that change is really needed. Crises or threats will thaw resistance to change. One good example is the shifting relationship between General Motors (GM) and the United Auto Workers (UAW). GM leaders’ efforts to build a more collaborative relationship typically met with resistance from UAW leaders until bankruptcy proved the urgent need for working more closely together. Today, the UAW owns 17.5 percent of GM’s stock—the union wanted cash for the money GM owed it, but gave in for the sake of the whole enterprise. In addition, the crisis convinced the UAW to pledge not to strike before 2015, ceding leverage at the bargaining table and giving GM a better chance to survive.10 In many cases, though, there is no obvious crisis and leaders have to “find a rallying cry” that focuses people on a clear need for change.11 Leaders carefully scan the external and internal environment—looking at competitive conditions; market position; social, technological, and demographic trends; profit and loss; operations; and other factors. After identifying potential crises or problems, they find ways to communicate the information broadly and dramatically.

2. Stage 2 involves establishing a coalition with enough power to guide the change process and then developing a sense of teamwork among the group. For the change process to succeed, there must be a shared commitment to the need and possibilities for organizational transformation. Middle managers will seek top leader support in the coalition. It is also essential that lower-level managers become involved. Mechanisms such as off-site retreats can get people together and help them develop a shared assessment of problems and how to approach them. At MasterBrand Industries, for example, transformation began with an off-site meeting of some 75 key managers who examined the need for change and discussed ways to remake MasterBrand into a team-based organization.12

3. Stage 3 requires developing a vision and strategy. Leaders are responsible for formulating and articulating a compelling vision that will guide the change effort, and then developing the strategies for achieving that vision. A picture of a highly desirable future motivates people to change. David Davoudpour, owner, chairman, and CEO of Shoney’s, a chain of casual restaurants that pioneered the all-you-can-eat salad bar and breakfast buffet, is inspiring managers and franchise owners with a vision of restoring Shoney’s to its glory days. The chain, founded in the 1940s, once boasted 1,200 restaurants nationwide but shrank to less than 300 and neared bankruptcy because leaders failed to change with the times. Davoudpour’s strategy includes revamping the décor, offering fresher, healthier food and more contemporary menu items, and providing coherent headquarters leadership to maintain consistency and quality.13

4. In stage 4, leaders use every means possible to widely communicate the vision and strategy. At this stage, the coalition of change agents should set an example by modeling the new behaviors needed from employees. They must communicate about the change at least 10 times more than they think necessary. Transformation is impossible unless a majority of people in the organization are involved and willing to help, often to the point of making personal sacrifices. At Yellow Freight System, CEO Bill Zollars regularly visited terminals across the country to communicate his vision of transforming Yellow Freight from a traditional trucking company to a one-stop-shop for a range of customers’ logistics and transportation needs. “Repetition is important, especially when you’re trying to change the way a company thinks about itself,” Zollars advises. “You’re trying to create new behaviors.”14

5. Stage 5 involves empowering employees throughout the organization to act on the vision. This means getting rid of obstacles to change, which may require revising systems, structures, or procedures that hinder or undermine the change effort. People are empowered with knowledge, resources, and discretion to make things happen. Leaders at Yellow Freight, for example, invested in a sophisticated, integrated IT system to give employees on the front lines the information they needed to solve customer problems quickly. The management system was also changed to give people freedom to make many decisions themselves without waiting for a supervisor to review the problem.

6. At stage 6, leaders generate short-term wins. Leaders plan for visible performance improvements, enable them to happen, and celebrate employees who were involved in the improvements. Major change takes time, and a transformation effort loses momentum if there are no short-term accomplishments that employees can recognize and celebrate. A good example comes from the U.S. Mint, where Philip Diehl wanted to transform the clumsy, slow-moving government bureaucracy into a fast, energetic organization that was passionate about serving customers, particularly coin collectors. Diehl publicly set an early goal of processing 95 percent of orders within six weeks. Even though that sounds agonizingly slow in today’s fast-paced business world, it was a tremendous improvement for the Mint. Achieving this short-term goal energized employees and kept the transformation efforts moving.15 A highly visible and successful short-term accomplishment boosts the credibility of the change process and renews the commitment and enthusiasm of employees.

7. Stage 7 keeps up the urgency, building on the credibility and momentum achieved by short-term wins to tackle bigger problems. Successful change leaders don’t simply declare victory after small wins and become complacent. They use courage and perseverance to give people the energy and power to take on more difficult issues. This often involves changing systems, structures, and policies; hiring and promoting people who can implement the vision; and making sure employees have the time, resources, and authority they need to pursue the vision. Leaders at one company striving to improve collaboration, for example, found employees’ energy flagging after they had achieved a short-term goal that improved on-time and complete shipments from 50 percent to 99 percent. Leaders decided to invest significant time and money in reconfiguring the plant to increase interaction of production and office personnel, thereby creating a feeling of community that reinforced and continued the change effort in a highly visible way.16

8. Stage 8 is where leaders make the changes stick.17 The transformation isn’t over until the changes have well-established roots. Leaders instill new values, attitudes, and behaviors so that employees view the changes not as something new but as a normal and integral part of how the organization operates. They use many of the ideas we discussed in Chapter 14 for changing organizational culture, such as tapping into people’s emotions, telling vivid stories about the new organization and why it is successful, selecting and socializing employees to fit the desired culture, and acting on the espoused values so that people know what leaders care about and reward. Leaders celebrate and promote people who act according to the new values. This stage also requires developing a means to ensure leadership development and succession so that the new values and behaviors are carried forward to the next generation of leadership.

Stages in the change process generally overlap, but each is important for successful change to occur. When dealing with a major change effort, leaders can use the eight-stage change process to provide a strong foundation for success.

Appreciative Inquiry

One of the most exciting approaches to leading change is a process known as appreciative inquiry. Appreciative inquiry (AI) engages individuals, teams, or the entire organization in creating change by reinforcing positive messages and focusing on learning from success.18 Rather than looking at a situation from the viewpoint of what is wrong and who is to blame for it, AI takes a positive, affirming approach by asking, “What is possible? What do we want to achieve?” For example, rather than looking at a problem such as decreasing sales, AI would investigate what makes sales increase. Appropriately framing a topic—to investigate what is right rather than what is wrong—is critical to the success of appreciative inquiry because it gets people away from blame, defensiveness, and denial and sets a positive framework for change. As David Cooperrider, co-creator of the AI methodology, puts it, “. . . the more you study the true, the good, the better, the possible within living human systems, the more the capacity for positive transformation.”19 AI can be applied on either a large or small scale.

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Leading a Major Change

Appreciative inquiry can accelerate large-scale organizational change by positively engaging a large group of people in the change process, including leaders and employees, as well as people from outside the organization, such as customers or clients, partners, and other stakeholders.

Once a topic has been identified for exploration, the group follows a four-stage appreciative inquiry process, as illustrated in Exhibit 15.3.20

1. Discovery. In the discovery stage, people identify “the best of what exists”—the organization’s key strengths and best practices. This stage is about discovering the unique qualities of the group that have contributed to success. Leaders interview people, asking them to tell stories that identify the best of their experiences with the organization. During an AI session focused on building a winning culture at American Express, for example, leaders asked people to describe an instance when they felt the most proud working for the company. Based on these stories, people together identify common themes.

2. Dream. Next, people reflect on what they learned during the discovery stage and imagine what it would be like if these extraordinary experiences were the norm—what if people at American Express, for instance, experienced the kind of environment every day that made them feel proud of working for American Express? The dream stage is about imagining “what could be” and creating a shared vision of the best possible future, grounded in the reality of what already exists. By allowing people to express their dreams for the future, AI inspires hope and energy for change.

3. Design. The design stage formulates action plans for transforming dreams into reality. This involves people making decisions about what the organization needs to do in order to be what it wants to be. At American Express, people identified the values that would support the kind of culture they wanted, the leadership behaviors that would instill and support the values, and the structures, systems, and processes that would keep the new cultural values alive.

4. Destiny. The final stage of AI is creating a destiny by translating the ideas identified in the previous stages into concrete action steps. This involves both celebrating the best of what exists and pushing forward to realize the dream by creating specific programs, activities, and other tangible forces that will implement the design and ensure the continuation of change begun during the AI process. For example, specific changes in training programs, performance evaluation, and reward systems were part of the destiny stage at American Express.

Using the AI methodology for a large-scale change may involve hundreds of people over a period of several days and may be conducted off-site to enable people to immerse themselves in the process of creating the future. A wide variety of organizations, including businesses, school systems, churches and religious organizations, communities, government agencies, and social service organizations, have used AI for large-scale change.21 The United States Navy applied AI in its goal to build “an empowered culture of excellence.” The Navy collected more than 300 stories of outstanding leadership and identified seven themes that provided a basis for change: entrusting sailors with responsibility; treating mistakes as learning opportunities; promoting learning; investing in others’ development; providing opportunities to excel and make a difference; bestowing appreciation and recognition; and building teamwork.22

Leading Everyday Change

Appreciative inquiry can also be applied by individual leaders on a smaller scale. The nature of leadership means influencing people in many small ways on an ongoing basis. Good leaders work daily to gradually shift attitudes, assumptions, and behavior toward a desired future. When individual leaders in an organization are involved in daily change efforts, they have a powerful cumulative effect.23

Leaders can use the tools of appreciative inquiry for a variety of everyday change initiatives, such as developing followers, strengthening teamwork, solving a particular work issue, or resolving conflicts.24 Again, the key is to frame the issue in a positive way and keep people focused on improvement rather than looking at what went wrong. Jim Gustafson provides an example of the everyday use of appreciative inquiry.

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Leading for Innovation

The American Management Association asked 500 CEOs the question: “What must one do to survive in the twenty-first century?” The top answer? “Practice creativity and innovation.”26 It is somewhat troubling, then, that innovation has been a top target for cost-cutting as the economy has slumped. In a 2009 survey by BusinessWeek and the Boston Consulting Group, more CEOs said that spending on innovation will be flat or down than since the first survey in 2005.27

Leaders in many companies, though, are finding creative ways to encourage and support the creation and implementation of new ideas. Effective leaders find ways to promote creativity in the departments where it is most needed. For example, some organizations, such as hospitals, government agencies, and nonprofit organizations, may need frequent changes in policies and procedures, and leaders can promote creativity among administrative workers. For companies that rely on new products, leaders promote the generation and sharing of ideas across departments and, increasingly, with outsiders. In most successful companies, leaders want everyone to be searching both inside and outside the company for new ideas to solve problems and meet customer needs.

One of the best ways for leaders to facilitate continuous change is to create an environment that nourishes creativity. Creativity is the generation of ideas that are both novel and useful for improving efficiency or effectiveness of an organization.28 Creative people come up with ideas that may meet perceived needs, solve problems, or respond to opportunities and are therefore adopted by the organization. However, creativity itself is a process rather than an outcome, a journey rather than a destination. One of the most important tasks of leaders today is to harness the creative energy of all employees to spur innovation and further the interests of the organization.

The Creative Organization

Leaders can build an environment that encourages creativity and helps the organization be more innovative. Five elements of innovative organizations are listed in the left column of Exhibit 15.4, and each is described in the following paragraphs.29 These elements correspond to the characteristics of creative individuals, listed in the right column of the exhibit.

Alignment For creative acts that benefit the organization to occur consistently, the interests and actions of everyone should be aligned with the organization’s purpose, vision, and goals. Leaders make clear what the company stands for, consistently promote the vision, and clarify specific goals. In addition, they make a commitment of time, energy, and resources to activities that focus people on innovation. Many organizations set up separate creative departments or venture teams. One popular approach is the idea incubator. An idea incubator provides a safe harbor where ideas from people throughout the organization can be developed without interference from company bureaucracy or politics.30 Yahoo! started an off-site incubator to speed up development of ideas and be more competitive with Google. Dubbed “Brickhouse” and located in a hip section of San Francisco, the idea incubator gets about 200 ideas submitted each month and a panel sorts out the top 5 to 10. “The goal is to take the idea, develop it, and make sure it’s seen by senior management quickly,” says Salim Ismail, head of Brickhouse.31

Creative Values You may have noticed that most children have a natural desire to explore and create. Unfortunately, this desire is sometimes squelched early in life by classroom teachers who insist on strict adherence to the rules. Good leaders find ways to unleash deep-seated employee motivation for creativity and innovation. At W. L. Gore, best known for Gore-Tex fabrics, leaders basically did away with the rules so that people feel free to explore and experiment. There are no bosses at Gore; people explore ideas on their own and recruit others who believe in and want to work on the idea. That’s how Gore got into businesses as diverse as Glide dental floss, Ride-On bike cables, and Elixir guitar strings.32 Leaders can encourage an entrepreneurial spirit by instilling values of curiosity, exploration, and informed risk-taking. This corporate entrepreneurship can produce a higher-than-average number of innovations. One important outcome is to facilitate idea champions. Idea champions are people who passionately believe in an idea and fight to overcome natural resistance and convince others of its value. Change does not happen by itself. Personal energy and effort are needed to successfully promote a new idea. Champions make sure valuable ideas get accepted and carried forward for implementation.

Unofficial Activity For creativity to flourish, employees need to be able to experiment and dream outside of their regular job description. Leaders can give people free time for activities that are not officially sanctioned. One study of creativity found that in almost every case the essence of the creative act came during the “unofficial” time period.33 Dream time is what makes it possible for companies to go where they never expected to. The classic example is 3M’s Post-it Notes, one of the five most popular 3M products and one that resulted from an engineer’s free-time experiments with another worker’s “failure”—a not-very-sticky glue. 3M lets employees spend 15 percent of their time on any project of their own choosing, without management approval.34 Another company that encourages unofficial activity is Google, Number 2 on BusinessWeek’s 2009 list of most innovative companies, where engineers spend 20 percent of their time on projects outside their regular jobs.35 Google’s founders once tracked the success of ideas management had backed versus those that had been executed by employees without direction or support from above, and they found a higher success rate among the ideas developed through unofficial activities.36

Open Culture Highly innovative companies maintain an open culture and look everywhere for new ideas. Leaders can encourage openness by rotating people into different jobs, allowing them time off to participate in volunteer activities, and giving them opportunities to mix with people different from themselves. One aerospace company uses the phrase Get out of Kansas! to stress the importance of looking for novel ideas in the world outside company walls.37 Organizations can give people opportunities to work with customers, suppliers, and people outside the industry, which contributes to a flow of fresh ideas. Executives at Productos Cementos Mexicanos ride in cement trucks to get ideas about customer needs. Sloan Kettering Cancer Center worked with design firm IDEO, which took clinic staff to follow patients from their homes and through their treatments, leading to significant improvements in patient care.38 Today’s most successful companies are including customers, strategic partners, suppliers, and other outsiders directly in the innovation process, which is often called open innovation.39 Companies such as Kraft Foods, General Mills, LEGO, Threadless, and Peugeot, for example, invite people to submit ideas over the Internet.40 Apple allows a community of third-party software developers to create applications for the iPhone and deliver them directly to users.41 Consumer products firm Procter & Gamble achieved an 85 percent increase in the success rate of innovation efforts thanks largely to open innovation. The Leader’s Bookshelf further describes Procter & Gamble’s highly successful approach to innovation.

Team Collaboration Although many individuals have creative ideas, most innovations are generated by groups of people working together. Rather than leave people stuck in their departmental silos, smart leaders find ways to get people communicating and collaborating across boundaries. Leaders at one company, for example, said they had lots of employees capable of coming up with good ideas, but they still weren’t innovating. To kick-start collaboration across departments, the company held an off-site conference designed to get people from different specialties who had complementary skills and talents talking to one another. Everyone was given an electronic name tag that contained information about the person’s skills and interests. When an employee approached someone with complementary skills, the badge would light up and flash a welcome such as “Hi, Susan. We should be talking about biochemistry.”42 Many companies use internal Web sites that encourage cross-organizational collaboration. For example, Arup Group, a British engineering services company, developed an online “knowledge map” that shows the company’s different areas of expertise and how departments and employees are connected to one another in terms of important information flows.43

Leaders at companies such as Google, Arup Group, and Procter & Gamble use the characteristics of innovative organizations— alignment, creative values, unofficial activity, open culture, and team collaboration—to ignite creativity in specific departments or the entire organization.

Many organizations that want to encourage innovation also strive to hire people who display the characteristics of creative individuals, as listed in the right-hand column of Exhibit 15.4. Creative people are often known for open- mindedness, curiosity, independence, self-confidence, persistence, and a focused approach to problem solving. Clearly, these characteristics are stronger in some people than in others. However, research on creativity suggests that everyone has roughly equal creative potential. The problem is that many people don’t use that potential. Leaders can help both individuals and organizations be more creative.

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Leading Creative People

Leaders of today’s organizations have compelling reasons to encourage creativity. They need employees to continually be contributing ideas in order to respond to new challenges. People can be more creative when they are open-minded, curious, and willing to take risks. Leaders can increase individual creativity by facilitating brainstorming, lateral thinking, and creative intuition.

Brainstorming A good way leaders can encourage creativity is to set up brainstorming sessions. Assume your organization faces a problem such as how to reduce losses from shoplifting, speed up checkout, reduce food waste, or lessen noise from a machine room. Brainstorming uses a face-to-face interactive group to spontaneously suggest a wide range of creative ideas to solve the problem. The keys to effective brainstorming are:44

1. No criticism. Group members should not criticize or evaluate ideas in any way during the spontaneous generation of ideas. All ideas are considered valuable.

2. Freewheeling is welcome. People should express any idea that comes to mind, no matter how weird or fanciful. Brainstormers should not be timid about expressing creative thinking. As a full-time developer of ideas at Intuit said, “It’s more important to get the stupidest idea out there and build on it than not to have it in the first place.”45

3. Quantity desired. The goal is to generate as many ideas as possible. The more ideas the better. A large quantity of ideas increases the likelihood of finding excellent solutions. Combining ideas is also encouraged. All ideas belong to the group and members should modify and extend ideas whenever possible.

One improvement in the brainstorming process is to have people write down their ideas before coming to the brainstorming session, and then to go back and write down ideas immediately after the session. Taking advantage of each person’s before and after thinking will increase creative output.46 Brainstorming has been found to be highly effective for quickly generating a wide range of creative alternatives. After all the ideas are expressed and recorded, the group can have another session to discuss and evaluate which ideas or combination will best solve the problem.

Some companies are practicing an extreme type of brainstorming, based on the popularity of television reality shows, that puts people together for an extended time period to come up with ideas. Under a program called Real Whirled, for example, Whirlpool sends teams of eight people to live together for seven weeks—and to use Whirlpool appliances for cooking and cleaning, of course. Best Buy has used a similar program, with teams of people who previously didn’t know one another living together for 10 weeks in a Los Angeles apartment complex. A new service, Best Buy Studio, which provides Web-design consulting for small businesses, came directly out of ideas hatched at one of the sessions.47

Another recent approach, called electronic brainstorming, or brainwriting, brings people together in an interactive group over a computer network.48 People can submit ideas as well as read and extend others’ ideas. Austin, Texas–based ad agency GSD&M uses electronic brainstorming sessions that include outsiders as well as employees to quickly come up with ideas for ad campaigns. Leaders say the sessions generate thousands of ideas, and keeping things anonymous “keeps the boss and the new hire on the same level.”49 Studies show that electronic brainstorming generates about 40 percent more ideas than individuals brainstorming alone, and 25 percent to 200 percent more ideas than regular brainstorming groups, depending on group size.50 Why? Primarily because people participate anonymously, the sky’s the limit in terms of what they feel free to say. Creativity also increases because people can write down their ideas immediately, avoiding the possibility that a good idea might slip away while the person is waiting for a chance to speak in a face-to-face group.

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With electronic brainstorming, social inhibitions and concerns are circumvented, which typically allows for a broader range of participation. A shy, insecure person’s idea gets the same chance at being heard as that of the outgoing, confident hotshot. Another advantage is that electronic brainstorming can potentially be done with groups made up of employees from around the world, as well as outsiders, further increasing the diversity of ideas. For example, GSD&M invites outsiders from widely different backgrounds—from economists to video gamers—to brainstorm ideas for ad campaigns for the PGA Tour, Southwest Airlines, AT&T, the U.S. Air Force, and other clients.51

Lateral Thinking Most of a person’s thinking follows a regular groove and somewhat linear pattern from one thought to the next. But linear thinking does not often provide a creative breakthrough. Linear thinking is when people take a problem or idea and then build sequentially from that point. A more creative approach is to use lateral thinking. Lateral thinking can be defined as a set of systematic techniques used for changing mental concepts and perceptions and generating new ones.52 With lateral thinking, people move “sideways” to try different perceptions, different concepts, and different points of entry to gain a novel solution. Lateral thinking appears to solve a problem by an unorthodox or apparently illogical method. Lateral thinking makes an unusual mental connection that is concerned with possibilities and “what might be.”

Companies as diverse as Boeing, Nokia, IBM, and Nestlé have trained people to use lateral thinking as a way to help the organization meet the demands of a rapidly changing global environment.53 To stimulate lateral thinking, leaders provide people with opportunities to use different parts of their brain and thus to make novel, creative connections. When people take time off from working on a problem and change what they are doing, it is possible to activate different areas of the brain. If the answer isn’t in the part of the brain being used, it might be in another that can be stimulated by a new experience. For example, a NASA scientist was taking a shower in a German hotel while pondering how to fix the distorted lenses in the Hubble telescope in 1990. Nobody could figure out how to fit a corrective mirror into the hard-to-reach space inside the orbiting telescope. The engineer noticed the European-style showerhead mounted on adjustable rods. This perception connected with the Hubble problem as he realized that corrective mirrors could be extended into the telescope on similar folding arms. Lateral thinking came to the rescue.54

To facilitate the creative flash from people, some managers reorganize frequently to mix people into different jobs and responsibilities, or they hire people with diverse experiences. Frequent change can be unsettling, but it keeps people’s minds fresh and innovative. Having someone with a real estate background run a bank branch brings a fresh perspective to problems. People with diverse skills challenge the status quo when developing strategies or responses to customers.55

Personal approaches to stretch your mind when solving problems could include behaviors such as changing your sleeping hours, taking a different route to work, reading a different newspaper or listening to a different radio station, meeting new people, trying new recipes, or changing your restaurant, recreation, or reading habits, all of which might stimulate a new part of the brain and trigger a lateral response. Unilever Best Foods asks 1,500 managers to leave their offices, laboratories, or factories for three days, twice a year, to visit customers and learn more about them. Card designers at American Greetings are free to change their work location, enjoy a library of hundreds of magazines and thousands of books, and confer with counterparts in other industries, such as automotive and appliance manufacturers.56

Alex Osborn, the originator of brainstorming, developed many creative techniques. One effective technique that is widely used to stimulate lateral thinking is the checklist in Exhibit 15.5. The checklist seems to work best when there is a current product or service that needs to be improved. If the problem is to modify a cell phone design to increase its sales, for example, the checklist verbs in Exhibit 15.5 can stimulate an array of different perceptions about the item being analyzed.

An exercise of considering opposites will also stretch the mind in a lateral direction. Physical opposites include back/front, big/small, hard/soft, and slow/fast. Biological opposites include young/old, sick/healthy, male/female, and tortoise/hare. Management opposites would be bureaucratic/entrepreneurial, or top-down/bottom-up. Business opposites are buy/sell, profit/loss, and hire/fire.57

Creative Intuition The creative flash of insight leaders want to awaken is actually the second stage of creativity. The first stage is data gathering. The mind is gathering data constantly, especially when you are studying background material on a problem to be solved. Then the creative insight bubbles up as an intuition from the deeper subconscious. It may be hard to trust that intuitive process because it seems “soft” to many business executives. The subconscious mind remembers all experiences that the conscious mind has forgotten. Intuition has a broader reach than any analytical process focused solely on the problem at hand.

Where or when do you get your best ideas? The most popular response is “in the shower.” One man got good ideas so consistently in the shower that he regularly experienced a 20-minute mental core dump of ideas. He purchased a piece of clear plastic and a grease pencil to write down the creative ideas while in his “think tank.” Creativity often occurs during a mental pause, a period of mixed tension and relaxation. In the shower, or while exercising, driving, walking, or meditating, the mind reverts to a neutral, somewhat unfocused state in which it is receptive to issues or themes that have not been resolved. A temporary activity that is relatively simple and mindless can provide the moment for a creative flash from deep in the subconscious. If the analytical part of the mind is too focused and active, it shuts down the spontaneous part. Thus, the semi-relaxed mental “pause” is like putting the analytical left brain on hold and giving room for the intuitive right brain to find the solution in the subconscious mind.58 C. S. Lewis, author of The Chronicles of Narnia, was fond of long, contemplative walks to facilitate his creative juices. Similarly, Jerry Kathman, president and CEO of brand design agency LPK, says he gets many of his ideas during his morning jog.59 Exercise is often considered a good way to give the mind a chance to work freely. One study suggested that a single aerobic workout is enough to kick the brains of college students into high gear for a couple of hours. Thus, physical exercise may be as effective as the shower for triggering the appropriate relaxed state that enables creative intuition to break through.60

To understand your own creative intuition, consider the following problems. Each set of three words has something in common.61 Do not over-analyze. Instead just relax and see if the common element pops up from your intuition.

1. April locker room bride-to-be

2. curtain fisherman nuclear reactor

3. rat blue cottage

4. envy golf beans

5. bowling alley tailor wrestling match

Don’t rush to find the answers. Give your intuitive subconscious time to work. After it’s finished working on these problems, consider the following question you might be asked if you interview for a job at Microsoft: How would you weigh a large jet aircraft without a scale? This question combines logical thinking and intuition. Before reading on, how might you compute the airplane’s weight doing something that is technologically feasible even if not realistic?62

The next challenge may appear to have no solution until your intuition shows you the obvious answer. In the following illustration, remove three matches to leave four.63

Here is another problem that may force your mind to respond from a different place to get the answer. The matches are an equation of Roman numerals made from ten matches. The equation is incorrect. Can you correct the equation without touching the matches, adding new matches, or taking away any matches?

Have you given adequate time to your creative intuition? The answers to these creative challenges follow:

For the word sets, the correct answers are (1) shower, (2) rods, (3) cheese, (4) green, and (5) pins.

One answer to weighing the jet aircraft would be to taxi the jet onto a ship big enough to hold it. You could put a mark on the hull at the water line and then remove the jet and reload the ship with items of known weight until it sinks to the same mark on the hull. The weight of the items will equal the weight of the jet.

The answer to the first match puzzle depends on how you interpret the word “four.” Rather than counting four matches, remove the matches at the top, bottom, and right and the answer is obvious—the Roman numeral IV. For the second match puzzle, you can solve this problem by looking at it from a different perspective—turn the page upside down. Did your creative intuition come up with good answers?

Implementing Change

Leaders frequently see innovation, change, and creativity as a way to strengthen the organization, but many people view change only as painful and disruptive. A critical aspect of leading people through change is understanding that resistance to change is natural—and that there are often legitimate reasons for it. This chapter’s Consider This box takes a lighthearted look at why employees may resist changes in some overly bureaucratic organizations.

The underlying reason why employees resist change is that it violates the personal compact between workers and the organization.64 Personal compacts are the reciprocal obligations and commitments that define the relationship between employees and organizations. They include such things as job tasks, performance requirements, evaluation procedures, and compensation packages. These aspects of the compact are generally clearly defined and may be in written form. Other aspects are less clear-cut. The personal compact incorporates elements such as mutual trust and dependence, as well as shared values. When employees perceive that change violates the personal compact, they are likely to resist. For example, a new general manager at the Dallas–Fort Worth Marriott wanted to change the incentive system to offer bonuses tied to the hotel’s financial performance, but employees balked. “They were thinking, ‘Here comes the Wicked Witch of the West taking my stuff away,’” the manager said. There are tools available to help leaders implement innovation and change.

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Tools for Implementation

Leaders can improve the chances for a successful outcome by following the eight-stage model discussed earlier in this chapter and using appreciative inquiry for both large and small changes. In addition, leaders mobilize people for change by engaging their hearts as well as their minds. Effective leaders use elements such as storytelling, metaphor, humor, symbolism, and a personal touch to reach people on an emotional level and sell them on proposed changes.65 Emotional connections are essential for persuading and influencing others; thus, leaders should not overlook the importance of emotional elements to overcome resistance to change.66

Leaders also use a number of specific implementation techniques to smooth the change process.

· Communication and training. Open and honest communication is perhaps the single most effective way to overcome resistance to change because it reduces uncertainty, gives people a sense of control, clarifies the benefits of the change, and builds trust. In one study of change efforts, the most commonly cited reason for failure was that employees learned of the change from outsiders.67 Top leaders concentrated on communicating with the public and shareholders, but failed to communicate with the people who would be most intimately affected by the changes—their own employees. It is important that leaders communicate with people face-to-face rather than relying solely on newsletters, memos, or electronic communication. For example, the CEO of one information technology company embarking on a major restructuring held a meeting with all employees to explain the changes, answer questions, and reassure people that the changes were not going to result in job losses.68

Employees frequently also need training to acquire skills for their role in the change process or their new responsibilities. Good change leaders make sure people get the training they need to feel comfortable with new tasks, such as when Canadian Airlines International spent a year and a half training employees in new procedures before changing its entire reservations, airport, cargo, and financial systems.69

· Participation and involvement. Participation involves followers in helping to design the change. Although this approach is time-consuming, it pays off by giving people a sense of control over the change activity. They come to understand the change better and become committed to its successful implementation. A study of the implementation and adoption of new computer technology at two companies, for example, showed a much smoother implementation process at the company that introduced the change using a participatory approach.70

· Coercion. As a last resort, leaders overcome resistance by threatening employees with the loss of jobs or promotions or by firing or transferring them. Coercion may be necessary in crisis situations when a rapid response is needed. For example, a number of top managers at Coca-Cola had to be reassigned or let go after they refused to go along with a new CEO’s changes for revitalizing the sluggish corporation.71 Coercion may also be needed for administrative changes that flow from the top down, such as downsizing the workforce. However, as a general rule, this approach to change is not advisable because it leaves people angry at leaders, and the change may be sabotaged.

Leaders at Raytheon Missile Systems faced an urgent need for change, but they wisely realized that participation and involvement, communication, and training would lead to far better results than trying to force the changes on employees.

[In The Lead Box 3 Here]

The change journey at Raytheon Missile Systems was not without challenges, but by communicating with employees, allowing people to participate in the change, actively involving factory managers, and providing training, leaders overcame most of the resistance and facilitated a smoother implementation. After two years, they decided to apply for the Shingo Prize for Excellence in Manufacturing as a way to gauge the organization’s progress. Surprisingly, RMS won the award on its first attempt, which served both as a reminder of how far the organization had come and a way to celebrate and reward factory managers for all their hard work.

The Two Faces of Change

Effectively and humanely leading change is one of the greatest challenges for leaders. The nature and pace of change in today’s environment can be exhilarating, but it can also be inconvenient, painful, and downright scary. Particularly with the recent economic slump, people are feeling a lot of fear and anxiety. Even when a change appears to be good for individual employees as well as the organization, it can lead to decreased morale, lower commitment, and diminished trust if not handled carefully. In addition, some changes that may be necessary for the good of the organization can cause real, negative consequences for individual employees, who may experience high levels of stress, be compelled to quickly learn entirely new tasks and ways of working, or possibly lose their jobs.

Some of the most difficult changes are those related to structure, such as redefining positions and responsibilities, reengineering the company, redesigning jobs, departments, or divisions, or downsizing the organization. In many cases, these types of changes mean that some people will be seriously hurt because they will lose their jobs. Numerous organizations have experienced widespread layoffs in recent years. This is one of the most difficult situations leaders face; they have to handle the layoffs in a way that eases the pain and tension for departing employees and maintains the trust, morale, and performance of employees who remain with the organization.

Leadership and Downsizing

Downsizing refers to intentionally reducing the size of a company’s workforce. Massive downsizing became a common practice after the Wall Street meltdown led to a global economic crisis, as discussed in Chapter 1. On one Monday in January 2009 alone, companies announced more than 75,000 job cuts around the world, including 20,000 at Caterpillar, the largest maker of construction and mining equipment, 8,000 at wireless provider Sprint Nextel, and 7,000 at home supply retailer Home Depot.73 That came on the heels of millions of job cuts in 2008, not only in the beleaguered financial services and auto industries, but at electronics firms, software companies, transportation companies, media organizations, telecommunications firms, and colleges and universities, as well.

Although experts have found that massive downsizing has often not achieved the intended benefits, and in some cases has significantly harmed the organization,74 for some companies in recent years, it became a necessary means of survival. Other companies searched for creative ways to avoid layoffs, including freezing salaries or cutting pay and benefits, shortening the workweek, implementing work-sharing programs, and asking employees to take unpaid furloughs.75 FedEx instituted pay cuts for 36,000 salaried employees, including top leaders, in an effort to avoid layoffs. CEO Fred Smith took the biggest cut, at 20 percent; other senior executives took cuts of around 8 to 10 percent; and salaried employees saw their pay cut by 5 percent.76

Even in good economic times, there are situations when downsizing is a necessary part of a thoughtful restructuring of assets or other important change initiatives.77 Anytime job cuts are made, leaders should be prepared for increased conflict and stress, stronger resistance to change, and a decrease in morale, trust, and employee commitment.78 A number of techniques can help leaders smooth the downsizing process and ease tensions for employees who leave as well as those who remain.79 For one thing, leaders need to be open and honest about a pending layoff, even when they’re not certain exactly what is going to happen. At Aruba Networks, leaders held a companywide meeting to explain that layoffs were going to be required in order to save the company.80 Leaders should provide advance notice with as much information as possible to employees who will be let go, and they should remember that U.S. law requires companies with 100 or more employees to give 60 days’ written notice of a mass layoff or plant closing. Leaders can also involve employees in shaping the criteria for which jobs will be cut or which employees will leave the company. Other options are to offer incentive packages for employees to leave voluntarily or to offer alternative work arrangements such as job-sharing and part-time work.

Providing assistance to displaced employees, such as through training programs, severance packages, extended benefits, outplacement assistance, and counseling services for both employees and their families, can ease the trauma associated with a job loss. In addition, this shows remaining employees that leaders care about people, which can help to ease employees’ feelings of confusion, guilt, anger, and sadness over the loss of colleagues. Many companies also provide counseling to help remaining employees handle the emotional difficulties associated with the downsizing.

Even the best-led organizations may sometimes need to lay off employees in a turbulent environment. Leaders can attain positive results if they handle downsizing in a way that enables remaining organization members to be motivated, productive, and committed to a better future.

Leadership Essentials

· The important point of this chapter is that tools and approaches are available to help leaders facilitate creativity and innovation and manage change. Change is inevitable, and the increased pace of change in today’s global environment has led to even greater problems for leaders struggling to help their organizations adapt. A major factor in the failure of organizations to adapt to changes in the global environment is the lack of effective change leadership. Leaders who can successfully accomplish change typically define themselves as change leaders, describe a vision for the future in vivid terms, and articulate values that promote change and adaptability. Change leaders are courageous, are capable of managing complexity and uncertainty, believe in followers’ capacity to assume responsibility for change, and learn from their own mistakes.

· Major changes can be particularly difficult to implement, but leaders can help to ensure a successful change effort by following the eight-stage model of planned change—establish a sense of urgency; create a powerful coalition; develop a compelling vision and strategy; communicate the vision; empower employees to act; generate short-term wins; keep up the energy and commitment to tackle bigger problems; and institutionalize the change in the organizational culture.

· An exciting approach to change management known as appreciative inquiry engages individuals, teams, or the entire organization in creating change by reinforcing positive messages and focusing on learning from success. Rather than looking at a situation from the viewpoint of what is wrong and who is to blame, AI takes a positive, affirming approach and follows the stages of discovery, dream, design, and destiny. Appreciative inquiry is powerful for leading both major changes and smaller, everyday changes.

· Leading for innovation is a significant challenge for today’s leaders. One way is by creating an environment that nourishes creativity in particular departments or the entire organization. Five elements of innovative organizations are alignment, creative values, unofficial activity, open culture, and team collaboration. These correspond to characteristics of creative individuals. Creative people are less resistant to change. Although some people demonstrate more creativity than others, research suggests that everyone has roughly equal creative potential. Leaders can increase individual creativity by facilitating brainstorming, lateral thinking, and creative intuition.

· Implementation is a critical aspect of any change initiative. Leaders should strive to understand why people resist a change. They can use communication and training, participation and involvement, and—as a last resort— coercion to overcome resistance. Leaders should recognize that change can have negative as well as positive consequences. One of the most difficult situations leaders may face is downsizing. They can use techniques to help ease the stress and hardship for employees who leave as well as maintain the morale and trust of those who remain.