Driving Organizational Change in the Midst of Crisis

After the dust had settled, the division CEO confided he had never seen a culture as broken as the one he encountered when he was hired. What it took to get his organization on its feet and moving in the right direction was an amalgam of powerful forces: an unprecedented regulatory fiat, third-party oversight and, above all, leaders at every level who were open to learning. The CEO would be the first to admit there was no solitary hero.

Observers often label an organizational crisis as financial or technological or as a failure of leadership, but the reality defies simple categories. We have studied firsthand a crisis in the ultimate high-pressure industry. The resolution demonstrates that organizations are more likely to weather a storm and emerge stronger if leaders avoid oversimplifying the situation and instead allow a gradual understanding to emerge and be tested in action.1 In the case study, managers and employees at every level learned life-changing lessons — lessons that can be used in all industries to improve managers’ effectiveness and companies’ competitiveness in turbulent business environments.

The crisis at Millstone Nuclear Power Station in Waterford, Connecticut, is a tale of lost trust, external pressure, internal strife, personal transformation, cultural change and emergent leadership.2 The resolution evolved from daily decisions, reactions to decisions and many contributors’ creative solutions. Hence the lessons’ broader application is best conveyed through a story reflecting that evolution and the give-and-take of the people involved.

In 1997, Hartford-based Northeast Utilities, the parent of Millstone’s operating company, was facing bankruptcy. Its stock had plummeted from $26 in early 1996 to less than $8. Millstone’s power-producing units were shut down. Making improvements at Millstone and buying replacement power for customers was costing the utility millions of dollars every day. Nevertheless, by August 2000, Millstone was again producing electricity, the stock had gone up, and Northeast Utilities was able to sell the power station for $1.3 billion. How could an organization with a seriously broken culture accomplish such a turnaround?

Setting the Stage

In 1996, Millstone had more than 2,000 employees, plus 1,000 consultants and contractors. Its three nuclear-power units were operated by Northeast Nuclear Energy Co., a wholly owned subsidiary of Northeast Utilities. During the 1970s and 1980s, Northeast Utilities had been a recognized industry leader, especially respected for its engineering organization.

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References

1. C. Argyris, “Knowledge for Action: A Guide to Overcoming Barriers to Organizational Change” (San Francisco: Jossey-Bass, 1993); and K.E. Weick, “Sensemaking in Organizations” (Thousand Oaks, California: Sage, 1995).

2. The first author was on the Nuclear Committee Advisory Team, reporting to the Nuclear Committee of the Board of Trustees of Northeast Utilities. From its beginning in 1996 to its termination in 2000, he met regularly with staff responsible for employee concerns and the safety-conscious work environment, observed meetings and read documents. Also, the authors conducted 18 interviews with key people from Northeast Utilities companies, Millstone, the U.S. Nuclear Regulatory Commission and the Nuclear Energy Institute, an industry lobbying group.

3. U.S. Nuclear Regulatory Commission, “Annual Report, 1994-FY 95, Office for Analysis and Evaluation of Operational Data, NUREG-1272” (Washington, D.C.: U.S. Nuclear Regulatory Commission, 1996).

4.E. Pooley, “Nuclear Warriors,” Time, March 4, 1996, 46–54.

5. J.N. Hannon, et al., “Millstone Independent Review Group, Handling of Employee Concerns and Allegations at Millstone Nuclear Power Station Units 1, 2, & 3 from 1985-Present” (Washington, D.C.: U.S. Nuclear Regulatory Commission, Oct. 24, 1996).

6. F.J. Miraglia, “Order Requiring Independent, Third-Party Oversight of Northeast Nuclear Energy Company’s Implementation of Resolution of Millstone Station Employee Safety Concerns” (Washington, D.C.: U.S. Nuclear Regulatory Commission, Oct. 24, 1996).

7. Some commissioners believe the NRC overreacted to Millstone. See N.J. Diaz, “Comments of Commissioner Diaz on SECY-98-119” (Washington, D.C.: U.S. Nuclear Regulatory Commission, June 11, 1998).

8. For example, several key contributors now work at Alyeska, the Alaska oil pipeline company. Many have accepted invitations to speak to other organizations. See D. Amerine, “Establishing a Safety Conscious Work Environment” (presentation at the U.S. Department of Energy Hanford site, Richland, Washington, March 25, 1999). The special features of high-hazard work systems are described in T.R. LaPorte and P.M. Consolini, “Working in Practice but Not in Theory: Theoretical Challenges of ‘High-Reliability Organizations,’ ” Journal of Public Administration and Research 1, no. 1 (winter 1991): 19–47; C. Perrow, “Normal Accidents: Living With High Risk Technologies” (New York: Basic Books, 1984); J. Reason, “Managing the Risks of Organizational Accidents” (Brookfield, Vermont: Ashgate, 1997); and K.E. Weick, K.M. Sutcliffe and D. Obstfeld, “Organizing for High Reliability: Processes of Collective Mindfulness,” Research in Organizational Behavior 21 (1999): 81–123.

9.Quotations come from our interviews.

10. J.W. Beck, J.M. Griffin and B.P. Garde, “Independent Oversight of the Safety Conscious Work Environment at the Northeast Utilities Millstone Site” (presentation at the American Nuclear Society International Topical Meeting on Safety of Operating Reactors, San Francisco, Oct. 11–14, 1998); and Little Harbor Consultants Inc., “Oversight Plan, Independent Third Party Oversight Program (ITPOP), revision 2” (Cohasset, Massachusetts: Little Harbor Consultants, 1998).

11. A chilling effect refers to employees’ suppressing their complaints because they perceive that their concerns will be met with retaliation.

12. The board consisted of the leader of the safety-conscious work environment initiative, the director of human resources and a representative from the legal-contracts area, with the manager of the employee-concerns oversight panel in attendance.

13. Trust in the intentions vs. the competence of management differ. See A.C. Edmondson and B. Moingeon, “Learning, Trust and Organizational Change: Contrasting Models of Intervention Research in Organizational Behaviour,” in “Organizational Learning and the Learning Organization,” eds. M. Easterby-Smith, J. Burgoyne and L. Araujo (Thousand Oaks, California: Sage, 1999), 157–175.

14. True of many industries. See A.C. Edmondson, “Learning From Mistakes Is Easier Said Than Done: Group and Organizational Influences on the Detection and Correction of Human Error,” Journal of Applied Behavioral Science 32, no. 1 (March 1996): 5–28; and D.N. Michael, “On Learning To Plan and Planning To Learn” (San Francisco: Jossey-Bass, 1976).

15. Little Harbor Consultants Inc., “Assessment of Millstone Safety Conscious Work Environment Performed June 21-July 1, 1999” (Cohasset, Massachusetts: Little Harbor Consultants, 1999).

16. R.M. Kanter, B. Stein and T. Jick, “The Challenge of Organizational Change: How Companies Experience It and Leaders Guide It” (New York: Free Press, 1992); and J.P. Kotter, “Leading Change” (Boston: Harvard Business School Press, 1996).

17. M. Beer and R.A. Eisenstat, “The Silent Killers of Strategy Implementation and Learning,” Sloan Management Review 41, no. 4 (summer 2000): 29–40; and J. Gabarro, “The Dynamics of Taking Charge” (Boston: Harvard Business School Press, 1987).

18. D.A. Nadler, R.B. Shaw, A.E. Walton and associates, “Discontinuous Change: Leading Organizational Transformation” (San Francisco: Jossey-Bass, 1995); E.H. Schein, “Organizational Culture and Leadership” (San Francisco: Jossey-Bass, 1992); and P.M. Senge, “Leading Learning Organizations: The Bold, the Powerful, and the Invisible,” in “The Leader of the Future,” eds. F. Hesselbein, M. Goldsmith and R. Beckhard (San Francisco: Jossey-Bass, 1996), 41–57.

19. P.R. Schulman, “The Negotiated Order of Organizational Reliability,” Administration and Society 25 (November 1993): 353–372. For example, there were important visits to South Texas Project, a nuclear power plant that had emerged from crisis as an industry leader. Nilsson Associates had worked there.

20. C. Argyris, R. Putnam and D.M. Smith, “Action Science: Concepts, Methods and Skills for Research and Intervention” (San Francisco: Jossey-Bass, 1985).

21. R.M. Kramer, “Trust and Distrust in Organizations: Emerging Perspectives, Enduring Questions,” Annual Review of Psychology 50 (1999): 569–598; and E.M. Whitener, S.E. Brodt, M.A. Korsgaard and J.M. Werner, “Managers as Initiators of Trust: An Exchange Relationship Framework for Understanding Managerial Trustworthy Behavior,” Academy of Management Review 23, no. 3 (July 1998): 513–530.

ADDITIONAL RESOURCES

Ed Schein’s 1999 book “The Corporate Culture Survival Guide” (from Jossey-Bass in San Francisco) offers thoughtful and practical advice. Two interesting examples of senior managers reshaping their companies are seen in David Kearns and David Nadler’s description of Xerox in “Prophets in the Dark” (from HarperCollins in New York, 1992) and in Noel Tichy and Stratford Sherman’s story of Jack Welch at General Electric in “Control Your Destiny or Someone Else Will” (a 1993 Doubleday book).

Acknowledgments

The authors are grateful for the cooperation and candor of Bruce Kenyon and the other interviewees, who understood the importance of sharing Millstone’s lessons. The research was supported by a Marvin Bower Fellowship at the Harvard Business School.

1 Comment On: Driving Organizational Change in the Midst of Crisis

  • jwilson | May 12, 2011

    In my experience in business crisis drives change.

    It’s because as humans we are way too comfortable when things are good. But it’s when we hit crisis mode that we realize we need change, so we are driven to change.

    Sadly most of the time this comes at a cost because it is reactive management rather than proactive change management.

    James Wilson
    http://www.urbanvirons.com.au

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