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Harvard Business School

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Aug.at 24. 1991

Executing Change: Seven Key Considerations

Introduction

Since its appearance in 1979 as a staff paper for McKinsey consultants, the 7S approach has had a proiound impact on management thinking. With its premise that organizational effectiveness rests on the lit between structure. systems, style. skills. and superordinate goals. McKinsey shaped the thinking of an entire generation of management.

As ~ diagnostic device to identify what needed to change" the Mc:.Klnsey 7S framework proved to be quite effective. However. in terms of implementing and managlOg change, the McKi.nsey approach left much to be desired. Managers could effectively identify the areas of the organization tha~ needed to change, but were left with little guidance on successfully implementing the transformation.

lnnigued by the 7S concept, we set foeth to reexamine the problem of implementing change by identifying the structural features of the change process. After numerous case analyses. we found seven Ieey components of implementation present. in any change process. Although different from McKinsey's 7Ss. the components in our modeJ also begin with the letter S. The temptation to caplta.1.i%e on the popular alliteration was too great. and we too refer to our approach as a 7S model for implementing change.

Our 75 model suggests that managers make choices on seven key issues that influence the cutceme of the change situation. These are strategic intent. substance. scale. scope, speed. sequence and Style (See Figure 1). It would be arrogant to suggest that this list is exhaustive or that we have agreement from the entire academic community on the applicability of this approach. However. as with mose conceptual frameworks, the ultimate test is the extent to which managers find the approach intuitive and useful Our preliminary feedback indicates that many managers agree with the premises of this framework and its potential for application 10 the change situation.

• A SIngle definition of change is ethete&! I best. In duc:u.ssing change. we mean adjusting an organiution'S structure. sttategy. systems. c:u.l~, eee, to sh.iiting deln3J\cU of the elWltOnment.

Proft:Sso, Nitin Nohria IIJId Doctoral Cc"didtlt, Rakesh 1(""'4"" pr<p4f<d this not« as Iu basis fo class discusslI'" rathu lha" 10 iIlUSIfQI< tither cffCClIT>C or IMlftctiu< hAndling of an admi"islrali.,t silwllw n.

Copyright C 1993 by the Preslderu a.nd feUows of Harvard College. To order copies. c.a1l (617) 49~117 Or write u.e Publishing Division. Harvud Business School. Boslon. MA 02163. No part or this public~tion may be reproduced. srored in A ~nieyu syslem, used in ;\ spreadsheet, or t:;JlUtnittcd in lily fottn or by any :ncUtSeleceronic. mechanical. photocopying. tc(Qrding. or othcr.o.·~withoul the permlssion of Huvard Bu.sin~ School

Exe-cuting Ch.inge: Seven Key Considerations

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Xerox's L(lld~$hip Ihruugh QUlllity program is an example oi a change iniriarive with precise strategic intent. Afte: losing significant marketshare to III Japanese copIer manufacrurers because of high cost and poor quality, Xerox undertook an immense formal effort to insticutionalize quality in manufacturing and design throughout the organization. Within a three year period. Xerox educated over 70% of its workforce on concepts of quality design. customer service and competitive bench marking. The results of this effort are impressive. After ten years o{ eroding sales in the low and medium volume copier marker, Xerox has successfully rebuilt both its reputation and rnarketshare through the introduction of quality, affordable copiers.

In contrast. Motorola's Organizational Effectiveness Process (OEP) illustrates an initiative that was introduced with broad strategic intent .• oI\lthough in he midst of a large expansion in the 19805, Motorola'S CEO. Bob Galvin, felt that the organization needed to revitalize itself if it was to continue growing. The only problem was that he hi.tnseJ! was unsure of where he organization needed to go. Reali.Ung ha crafting a new vision and implemen ing the necessary changes required th effons of the entire organiUltion, he Introduced the OEP. The OEP was broken into wee phases. The focus of the first phase was information gathering-deiining what needed to change. The second phase f~ on initial lmptementatlcn-e-er, more speciiicaUy. commurucadng 10 the rest of the organization the results of the information gathering exercises and pilot projec s. Phase three efforts were directed toward insriru ionalizing the process. lnsrirutionaliza ion meant communicating its successes to date and incorporating OEP into the management reviews and systecns at Motorola-to "cascade the program to lower levels of management." The eruire effort, while initia.!ly greeted WIth great skepticism. proved to be an excellent vehicle for closing the gap in understanding and perspectives among the different groups in the company.' The result IS an organiution that continues to be recognized as an innovator in developing leadership in both the market and within the organization.

Three important concepts emerge from our exploration o( strategic intent. Snategic intent provides both shon and lcng term impetus to "'.1Iy chan~ effort. Strategic intent creates a tUlifying vision for the organization. This in tum creates a purpose or aim towards which organizational members direct their collective actions.

While having a precise strategic intent can create a tremendous momentum ior change. managers need to be aware of its potennal pitfalls. For example, precise strategic intent often quicldy becomes obsolete, A changing environment. new entrants, new tedmolog-/-a.lI cont:ibute to this obsolescence.

Broad strategic intent. on the other hand, allows for definition or the situation as it evolves. Hence, it is less liKeiy to become obsolete. The problem is that broad strategic intent is often lI\et with skepndsm, confusion. and uncoordinated action. ;'.$ the Motorola case demonstrates, a skilled manager provides inC"e3Sing srrucrure, guidance and definlnon to broad strategic intent. This enables the organization's change effortS to become more meaningful 10 all the stakeholders in the organization.

Finally, the skillful manager realizes that any statement of strategic intent deteriorates.

The l:\anager must constantly reexamine the espoused strategic intent and adapt II to the conditions the present situation demands.

In summary. strategic intent is a powerful th."US1 for change. Ideally il creates a bias for action 1.11 the present while still a.!lowing flexibility to ta ce advantage of unforeseen opportunities as they arise.

I Todd fide; Rosab"th Moss Kanter: and Barry 5''''n. T~ ChIlUcn8e oj Orggnl~!lonQI CMn8C (I 'ew Yor :

MacMillan. 1992)

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Executing OlAAge: Seven Key Considerations

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uncertainty of the merger for Western's employees. In an unprecedented move. Delta guaranteed a job to every full-time Western employee and took great pains to introduce Delta's culture to the new staff, The results were very positive. As the time line below indicates. Delta's initial emphasis on the softer aspect of integrating Western iJrtines proved to be instrumental in smooth.ing Ius transition,

Western-Delta Merger:

Tirneline of Events

1986 1987
Scp.17 Sep.18 ~t_1 ~L OcL Oct. J~ AP.-ScP.
, • II • • ~u e
WCSICm OcIIA's Delu's pIlotS Ocl~ Del ta LSSuCoS Mc.rgeris
Merger emplOyees CEO and lnd fllChl SI.~tions gunn= :neroO$ 10 >1J cOl1lpl~.
AMOunCed Receive Iccu:r ollter ~ces lacnlUms 10 CXl:(uti~ in I job (OC Wc:sIttn Wcs",m
from Delta's vuh Wcs"'m'$ to Weslem LA 10 lIlS"'er &llW~m .mplo =011 cmploy=
cso s coo HeadqUlll1G."'S ccaploy ee lounges Westem cmployu.s jobbcoer..W DO'"
WIth Welcome cues employees' polidcs..c1.C. in",gn",d
qUCS',joru wllbOelu's In contrast to th~ successful Western-Delta merger, let us rum to the turbulent NorthwestRepublic merger. The sequence taken by CEO Steve Rothrneir prill'larily focused on integrating the systems and structures of the two organizations, The prellini.rlary results of the merger were disastrous. The scheduling systems of the rwo airlines was incompatible. and rught delays, double booking and lost luggage became the norm on Northwest flights. These problems were compounded by Republic's unions. ln the months following the acquisition, Northwest rapidly put in new systems and practices to handle the combined operation. And although the technical issues were resolved, the relationship between management and labor grew uglier. By the summer of 1987. mechanics and baggage handlers were conducting an unofficial slowdown. Eighteen months later. suffering tremendous losses, ·ort. h west was bought out by a Los Angeles-based investor group,

Republic- orthwest Merger:
Timeline of Events
1986 1937
Sep.I ScJI· 0cI. t Dee. lune lune lILly Aug.
onhWCSI
Merger 1U1II1',," lOpS gov'! NOrthweSi
",,?OWlWl beein to soeI: to win meello.nics lislon employ=uc:
consolic.<c ortbwc.st begin slow- p:.soencer bellen "p: Ocwil
reservation Employees luggage down complaints Rothcim er l:i.tlinC IS6
andm:'" into Iheir =~i~~ pc:ople
SySlCmS wUon "",,"IS In choosing the sequence of change. managers should be aware of organizational character, It is clear, as both examples illustrate, that an understanding of the organization's history, culture and environment IS necessary for successful change. For example, while a hard-soft sequence may achieve 'Big Bang' change. the 'Sang' may be too much for the organization's members to absorb. Similarly, too much focus on 'soft' changes may render the organization inflexible because of over ccmmlnneots to stakeholders,

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ExtcUting Clwtge: Seven Key Considentions

49 .. -OJ3

Stta1egic Intent Precise ~ • Broad
Substance Soft ~ • Hard

Scale Small ~ .. Large

Scope [solaced ~ • Org. Wide

Speed Slow ~ • Fast

Sequence Hard-Soft • • Soft-Hard
..
Style Top-Down ~ .. Bonom-Up In addition to coherence among the 75s. managers need to make chcices that are robust over ime. Robustness means the abilities to stay responsive to' uncertainty and unforeseen events. It .involves making choices that enable short term progress. while allowing Cor long term flexibility . . Attltudinally. it means courage in decision malting. As Ken Arrow. a obel prize-winning economist writes. "to act. fully knowing our ignorance of posstble consequences ... to sustain the burden of action without certirude, and to always keep open the po55ibility of re<:ognizJ.ng past errors and changing course."

In swn.rnary. successfully irnph~lI\enting change is about making choices that are both coherent and robust. Organizations continually change. Each change situation requires that we address :he new easks and problems created by the change process. Coherence tells us that there is no optimal solution. Instead. in each situation the manager must balance the pluses and minuses of the choices within the 755. Robust action, on the other hand, reminds us to fOCU$ on present problems. not punt ourselves into a comer, and to continually evaluate the organizational situation.

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Executing Change: Three Generic Stntegies

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The diagram on the previous page depicts our 7S model in the context of programmatic change. The shaded circles indicate the choices a manager needs to make when implementing programmatic change.

In summary, our study emphasizes three factors necessary for successful programmatic Change. First. managers must manage both structure and behavior in programmatic change. Too often managers only focus on the organizational structure, business planning systems, control mechanisms, reporting relationships, and reward systems. Without emphasis on coordination, process, the informal organization, and other aspects of behavior it is unlikely that meaningful change will occur. Successful change results when the formal organization and the informal organization work together, rather than against each other. When you align these two aspects of the organization, organizational energy will be directed toward chieving business objectives rather than simply making the organization function.

Second, managers must customize programs to the pecific needs of the organization and its diverse units. There are no silver bullet solutions. Total Quality, Just In Time, arid Reengineerlng are meaningless to the plant sup rvisor struggling to deal with low moral and absenteeism. Managers must be careful in not confusing means for ends and process for outcome.3 In dec ding on a program, a manager must first dissect the needs of the organization. assess current systems, get input from the staif, and then finally choose and customize a program. The thoughtful manager reflects on the

, goals of the program and its relevance to the organization's problems.

Finally, we must realize that lasting change is a time consuming effort. Organizational histories are not easily forgotten. Because of Utis history there is a "rwo steps forward, one step back" character to programmatic change. In programmatic change we will find new processes competing against the organization's tendency to revert back to old behavior. Countering this force requires managers to continually reinvigorate the change process. Study after study leads u.s to the same answer-successful change requires the continual involvement of top management, Like basebaU. the secret lies not only with connecting the bat and the ball, but following through with your swing. The successful manager not only starts change initiatives, but follows through with them.

Discontinuous Change

Every organization has a sy tern-wide momentum. 4 This momentum can be thought of as an organiz non's current processes, structures, systems, and people. Most organizational activity is directed towards maintaining this momentum. Th re are times, however, when the organization must disrupt this momentum because of shifts in the internal organization or the environment. One of the true tests of successful management is reorienting an organization's strategy, structure. systems. processes, and people in the face of these shifts. We will call this reorientation discontinuous change. Examples of discontinuous change are radical reengtneering, merger or acquisition, and restructuring.

Discontinuous change is driven primarily by three factors. First is industry discontinuity.

This is characterized by major shifts in the technology, availability of substitutes, new processes, or deregulation. Th second is inter-crganizarional dynamics. These are situationS when an

3Ro~rt Schneifer and Harry Thomson, 'Successful Clu.nge Progranu Begin with Results: HartlQTd Business RariC-Ji. Oanwary-February 1992): 80

4Some concepts we wiU discuss in this section are dlscussed by Connie Ger5ick in -Revolucorury Change Theories: A. Multi·Level £xploration of the Punctuated Equilibrium Paradigm: AClJdnny of MAnagnnmt Rn;irol, 16 :1: 10·36, and Tuslunann. ewman, lind Rornanelll, "Convergence & Uphunl; Managing the Unste~dy Pace of Org.uuzatiorul Evolution: CDlijomiJz Managtmmt RCflirol" 23: ,29

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Executing Change, Three Generic Strategies

The 7Ss and Discontinuous Change

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The diagram above depicts our 7S model in the context of discontinuous change. The shaded •• circles indicate the choices a manage. needs to make when implementing programmatic change.

There are three points we wish to emphasize about successful discontinuous change. First, discontinuous changes cannot be introduced sequentially. Rather, changes in strategy, structure, and processes need to be concurrent. Sequential change runs the risk of being overwhelmed by individual, group, and organizational resistance.

Second, discontinuous change requires continual executive involvement in aU aspects of the change. This responsibility cannot be delegated. Since every contingency cannot be taken into ~ account prior to the change, managers must make rapid decisions on a number of issues. These issues range from questions on roles to breakdowns in the new processes.

Finally, discontinuous change must be followed through with attention to the organization's culture and people. Otherwise, th upheaval will continue to generate substantial stress and anxiety within the organization thereby contributing to a tendency to revert to old processes.

Emergent Change

Annealing is a useful metaphor for describing the third form of implementing changeemergent change.. An example of annealing, as it is defined in the physical sciences, is crystal formation. Here a system of particles at high temperature can be cooled slowly enough to allow equilibrium configurations to form at each temperature change. At the temperature zone where crystals begin to form, the COOling process can be repeatedly reversed until a satisfactory configuration is obtained.S With respect to organizations, emergent change is a useful mechanism where no universal solution is known, and where incremental improvement techniques risks getting stuck in organizational inertia.

An example of emergent change is Continuous Improvement. Here a manager suggests the need for change but offers no finn plan. Different groups in the organization respond differently to this challenge. If the experiments or changes within the groups produce innovative programs, the

5 Eric Leifu and Harrison White NWheeling and AnnuliJ\g: Fedeeal nd Multidivisional Control," in SociDl Fabric: Dimensians and Issut1, ed. James F: Short. [r., ( ewbury P~r ,CA: 5 ge Publications, Inc .• 1986)

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Executing Change: Three Generic Strategies

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The 7Ss and Emergent Change

There are three critical elements to emergent change, First, emergent change is presented' as a challenge versus a directive. Emergent change Is a transitional effort, not a fixed point. Because of its ambiguous nature, as the Motorola case demonstrates, it will require mid-course corrections.

Second, emergent change is experimentation. Experimentation involves searching, testing, and yes, sometimes failing, Experime.ntation will produce both continuous incremental change and leaps of change. The manager must conti.nualJy observe the changes in the organization and know when to freeze and reheat the emergent change process,

Third, emergent change is dilficul to transfer across the organization. Because of itS isolated nature, anneali.ng change will have only a limited impact on the rest of the organization unless it is accompanied by explicit strategies for traruferring knowledge.

Conclusion

Managers have many options on change strategies beyond the three we have discussed.

Because of the choices along the continuum of the 75's, a manager can design a change strategy that is consiste.nt with the needs of the organization, the challenges of the competitive environment, and her personal preferences.

However, regardless of the change strategy employed, there are three characteristics of every change strategy. First, managers need to ensure the coherence of their choices. They need to monitor, evaluate, adhere, and discard choices as the situation evolves. Second, any change strategy involves explicit tradeoffs, In choosing discontinuous change, for example, the tradeoff between speed and organizational quilibrium is made. Similarly, programmatic cha.nge is a tradeoff between clarity in intent and flexibility. Emergent change, on the other hand, is a tradeoff between active experimentation and focused effort. Finally, at different points of time during the change process, managers wiU need to act deliberately in ambiguous situations. The change process is erratic and unpredictable. Acting in this environment requires a manager to opt for the pragmatic rather thatl the optimal solution.

In short, change is a messy and u.npredic able process. e best tools a manager has are the constructs of coherence and robust action. These allow a manager 0 continually evolve her strategy to the dynamics of the situation, as well as enabling decisive action in an unpredictable environment

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