Achieving a Highly Effective Organization

by Glen D. Hoffherr and Robert P. Reid

We need ever-better ways of coping with
and assimilating change into our organizations.

During the last decade, U.S. business desperately rushed to implement business-improvement methodologies to restore its leadership in world markets. U.S. business has used total quality management, continuous improvement, reengineering and other flavor-of-the-week ideas to reform our cultures, improve our work processes and focus on customers in an effort to rekindle the profits and growth of the past.

Some implementations have succeeded, at least in the short term. More have failed after decimating the ranks of once-healthy businesses and terrorizing employees at all levels. The downsizing that seems to accompany most methodologies leaves the trust and the risk taking that produces new ideas at an all-time low. Has the gain been worth the price? Only the future will tell the whole story, but we know that to stop now will mean disaster.

The rate of change in communications, the global marketplace and new technologies is not slowing. Instead of stabilization, we need ever-better ways of coping with and assimilating change into our organizations and even our lives. We need ways to assimilate what we know and what we do in the reality of continuous change.

It is imperative that individuals understand their own context within which they work in their organization. This contextual understanding provides the basis for change. It provides the flexibility to meet customers' changing needs and integrate the dynamic growth of technology. Organizations must also become flexible to meet the needs of their individuals, their customers and their own existence.

Organizations change for three basic reasons: entropy, chance and planning. Those organizations that choose entropy have made an unconscious decision to go out of business at some time in the future. Those organizations that have decided to change through chance have made an unconscious decision to exist in a chaotic state. Those that have chosen to plan their change have begun their first step to long-term survival.

Organizations undergo four basic types of change: incremental, redesign, transformation and revolutionary. Since revolutionary changes are so all-encompassing that the organization is no longer recognizable, we will not address them. Figure 1 shows the other three types of change. Incremental changes are process-focused. These are most often associated with total quality management and continuous improvement. Individually, these changes are small, but when added together, they provide a significant boost to the efficiency of your service. When these efforts are customer-focused, they also improve the organization's effectiveness.

Redesign changes focus on the organization's critical systems. They are most often associated with redesign or reengineering efforts. These system changes most often are adaptive in nature and provide a factorial change in how the organization delivers its service. When these efforts also include the customer, they integrate appropriate new technologies into the organization's service-delivery methodologies.

Transformational changes occur only rarely. They result in the organization moving in a new direction. This new direction will be one of culture, mind-set, service to be delivered, organizational structure or similar significant change. These transformations tend to be very creative and manifest themselves in different ways. An example of a transformed organization is IBM, which has undergone two significant transformations in the last 40 years. The first was when they changed their service focus from mechanical devices such as typewriters and keypunches to computers. The second transformational change was a culture change when Louis Gerstner Jr. became their leader.

It is critical that individuals and management do not expect change greater than the effort that they are expending.

In many instances, management expects redesign or transformation but only provides the resources and commitment to complete incremental changes. When the redesign or transformation doesn't occur, the process that was used is dismantled and someone is found to receive the blame for the failure. Organizations must quit looking for where to place the blame and instead look to find out what they were trying to do vs. what they were actually doing.

Work as it is accomplished can be broken down into two major categories: value-added and nonvalue-added (see Figure 2). Nonvalue-added work most often becomes the target of incremental organizational changes. In our experience, management frequently espouses empowerment, self-direction and teamwork yet expects radical redesign or transformational changes. They expect this even though those involved in the change have little ability to affect the organization's direction or value-added work methodologies for the long term. When employees fail to meet these unrealistic expectations, management must find something to blame for the failure. Those involved or the program itself becomes the guilty party. Management fixes blame and then moves on to the next program of the month.

Organizational redesign has become quite popular as organizations realize that many of their value-added processes can be done differently. In an effort to use less resources, organizations attack their business value-added processes such as training and first-line management in an effort to slash costs. Figure 3 shows these business value-added processes and their relationship to work.

Business value-added processes often are perceived to have large amounts of nonvalue-added work embedded in them because when compared to other processes, they require more perceived effort. This may be an illusion. Every organization exists within its own context. During the organization's development into its current gestalt, it has built appropriate structures, methodologies and processes to deal with its normal business pace. These structures, methodologies and processes should be examined for redesign within the organization's values, culture and needs. They should not be retained without examination; however, equally important, they should not be dismantled arbitrarily.

Transformational changes may address either value-added or nonvalue-added areas with limited success. Such changes should focus on what work people accomplish and what work they should accomplish in the future. Transformation often requires "killing the cash cow" to move to new services. It is not concerned with being more efficient, effective or adaptive. It requires creativity and an understanding of the context of the organization and its customers, suppliers, employees, stakeholders, work methodologies, culture, language and the music it creates. Transformation requires leadership, innovation, creativity and stamina. Transformational change may include incremental changes and redesign of business processes, but it also transcends these changes and impacts the entire organization.

Figure 4 shows transformation in relation to the business value-added work that an organization currently performs. Business value-added work tends to expand to utilize all available resources. An example of business value-added tasks going out of control in this manner can be found in any bureaucracy. For instance, in a recent study of school districts, it was found that the ratio of dollars directly spent in the classroom nationwide has dropped to an average of less than 50 percent. In the early 1950s, the average was more than 66 percent. Despite this tremendous increase in administration, scoring on standardized tests has plummeted. At a minimum, these business value-added processes must be redesigned. Transformation may be desirable at least in some school districts.

Failure to make significant changes may result in revolutionary changes like those the health-care industry is undergoing.

Organizational change is about work and how we do it. This basic premise requires complete, fundamental, creative rethinking-including radical redesign of the organizational process to achieve dramatic improvements in critical contemporary measures of performances such as cost, service and speed. The organization may have to undergo transformation just to survive.

We as the human race have a long history of change-the very nature of man's history on the planet is one of change. Figure 5 illustrates the progress of the human race and shows the path of change in the basic nature of work. The past is a prologue. Our culture shapes us, but we are not obligated to continue it.

Only those organizations that have planned for change can expect to change in an effective manner over the long term. While short-term changes can be left to chance, they will eventually overcome the organization's ability to change. As the nature of work changes from the assembly line to information exchange, organizations are changing to structures that simulate neural networks. The context of work within these networks must be recognized and structures developed to control them to the point that they result in meaningful output. In addition, the individuals that operate within the network become more critical to the organization's success, while the old structures they operated within become less meaningful. Technology drives this change. Just as moveable type drove the change from farming to the factory age, moveable information is driving the global marketplace from the fact age to the freelance age. Where these changes will lead is beyond anyone's ability to predict at this time.

The basic types of structures that will become prevalent in the future as we evolve from the fact to the freelance society include the status quo of hierarchical management. Two other key structures will be the self-directed work team and the self-directed individual. Self-directed work teams are natural work groups that take on more of the day-to-day operations and self-management tasks. Self-directed individuals operate in ad-hoc teams, on individual projects and as independent consultants.

Organizations must develop resource data banks of these self-directed individuals, including those who may or may not work for the organization. These individuals will become much more involved in individual service delivery. Because of their technical expertise and ability to work without direct supervision, they will be shifted between projects, problems and organizations as required.

The formula for organizational survival can be stated simply as E2CA/C. The first E stands for efficiency, the second for effectiveness. Creativity and adaptability complete the numerator of this equation. The context for each individual, how the individual impacts the overall organization, and the operational environment complete the equation.

As the context of work evolves into the next century and age of man, the individual's ability to contribute must be maximized. Today's organizational structures will no longer be robust enough to support the required dynamic changes beyond the freelance era.

About the authors . . .

Glen D. Hoffherr is vice president for operations at Markon Inc. and an associate of the Organizational Effectiveness Institute of Johns Hopkins Whiting School of Engineering. He has more than 25 years' experience as a manager, author, speaker and organizational developer. He has written extensively in the areas of organizational change management, creative thinking, systems design and interpersonal relationships.

Hoffherr's most recent book, co-authored with Gerald Nadler and John Moran, is titled Breakthrough Thinking in Total Quality Management. His next book, Paving Your Success Path, co-authored with Robert Reid, will be out at the end of 1995. Hoffherr can be reached at (603) 898-3919, fax (603) 894-5770.

Robert P. Reid is co-founder of the Organizational Effectiveness Institute of Johns Hopkins Whiting School of Engineering. He has more than 25 years' experience as an educator, author, speaker and organizational developer. Reid has written extensively in the areas of organizational change management, creative thinking and systems design, and conducts courses and seminars at 17 colleges and universities.

Reid's most recent book, co-authored with Howard Scott, is titled Change From Within: People Make the Difference. He can be reached at (609) 589-6406, fax (609) 582-3906.
© 1995 Glen D. Hoffherr and Robert P. Reid. All rights reserved.