Few companies around the world have not tried to reinvent themselves — some more than once —during the past decade. Yet, for every successful corporate transformation, there is at least one equally prominent failure. GE’s dramatic performance improvement starkly contrasts with the string of disappointments and crises that have plagued Westinghouse. ABB’s ascendance to global leadership in power equipment only emphasizes Hitachi’s inability to reverse its declining fortunes in that business. And Philips’s successful revitalization since 1990 only highlights its own agonizingly slow turnaround in the preceding ten years.
What accounts for the success of some corporations and the failure of so many others? How did some organizations turn around transformation processes that had clearly stalled? In the course of five years of research into the nature and implications of the radically different organization and management models that have begun to emerge during the past decade, we studied more than a dozen companies as they implemented a succession of programs designed to rationalize their inefficient operations, revitalize their ineffective strategies, and renew their tired organizations. In the process, we have gained some insight into the reasons that some made recognizable progress in their transformational change process while others only replaced the dead weight of their bureaucracies with change program overload.
In observing how the successful corporate transformation processes have differed from those that struggled or failed outright, we were struck by two distinctions. First, successful transformation processes almost always followed a carefully phased approach that focused on developing particular organizational capabilities in appropriate sequence. Second, the managers of the successful companies recognized that transformation is as much a function of individuals’ behaviors as it is of the strategies, structures, and systems that top management introduces. As a result, rather than becoming preoccupied with downsizing and reengineering programs, they focused much attention on the changes required to fundamentally reshape what we described in our previous article as a company’s behavioral context.1
A Phased Sequence of Change
The problem with most companies that have failed in their transformation efforts is not that they tried to change too little, but that they tried to change too much. Faced with the extraordinary demands of their highly competitive, rapidly changing operating environments, managers have eagerly embraced the flood of prescriptive advice that consultants and academics have offered as solutions — typically in the random sequence of a supply-driven market for management fads.
1. See C.A. Bartlett and S. Ghoshal, “Rebuilding Behavioral Context: Turn Process Reengineering into People Revitalization,” Sloan Management Review, Fall 1995, pp. 11–23.
2. Results are from the Bain & Co./Planning Forum Survey reported in:
D.K. Rigby, “Managing the Management Tools,” Planning Review, September-October 1994, pp. 20–24.
4. Jack Welch described this logic in a presentation at the Harvard Business School in 1992. The logic can also be inferred from the detailed descriptions of the changes at GE. See:
N.M. Tichy and S. Sherman, Control Your Destiny or Someone Else Will (New York: Doubleday, 1993).
5. “Competitiveness from Within,” speech to GE employees, 1985.
6. Bartlett and Ghoshal (1995).
7. Past research on organizational climate has highlighted the importance of standards, feedback, and sanctions in building organizational discipline. See, for example:
G.H. Litwin and R.A. Stringer, “Motivation and Organizational Climate” (Boston: Harvard Business School, Division of Research, 1968);
R.T. Pascale, “The Paradox of Corporate Culture: Reconciling Ourselves to Socialization,” California Management Review 13 (1985): 546–558; and
G.G. Gordon and N. DiTomaso, “Predicting Corporate Performance from Organizational Culture,” Journal of Management Studies 29 (1992): 783–798.
8. For the importance of support in enhancing corporate performance, see:
R. Walton, “From Control to Commitment in the Workplace,” Harvard Business Review, March-April 1985, pp. 76–84.
For a more academically grounded analysis of the organizational requirements to create this attribute of behavioral context, see:
R. Calori and P. Sarnnin, “Corporate Culture and Economic Performance: A French Study,” Organizational Studies 12 (1991): 49–74.
9. Gordon and DiTomaso have shown the positive influence that ambitious goals can have on organizational climate. See Gordon and DiTomaso (1992).
For the importance of values and personal meaning, see:
J.R. Hackman and G.R. Oldham, Work Redesign (Reading, Massachusetts: Addison-Wesley, 1980); and
K.W. Thomas and B.A. Velthouse, “Cognitive Elements of Empowerment: An Interpretative Model of Intrinsic Task Motivation,” Academy of Management Review 15 (1990): 666–681.
10. The importance of trust features prominently in the academic literature on organizational climate. See, for example:
J.P. Campbell, M.D. Dunette, E.E. Lawler, and K.E. Weick, Managerial Behavior, Performance, and Effectiveness (New York: McGraw-Hill, 1970).
For a more recent contribution on the effect of trust, see:
R.D. Denision, Corporate Culture and Organizational Effectiveness (New York: John Wiley, 1990).
11. See, for example:
R.P. Rumelt, “Inertia and Transformation,” in C.M. Montgomery, ed., Resource-Based and Evolutionary Theories of the Firm (Boston: Kluwer Academic Publishers, 1995).