Tom Snee, Office of Strategic Communication, 319-384-0010 (office), 319-541-8434 (cell)
Change or die
Change or die
Change or die
American businesses are struggling with change, and that’s going to be an increasingly more serious problem for the economy in the coming years.
“Change is the most important challenge that many businesses face today because the pace of change is so rapid. How do you ensure that large organizations will be able to deal with that faster and faster pace?” asks Sara Rynes-Weller, professor of management and organizations in the Tippie College of Business. “Most companies aren’t doing it well enough.”
Rynes will talk about organizational change and the need to get it right when she delivers the University of Iowa’s 2013 Presidential Lecture on Sunday, Feb. 24 at 3:30 p.m. in the Fourth Floor Assembly Hall of the Levitt Center. The lecture, “Leading in the New Wave of Change,” is based on her teaching interest in organizational change—how important it is for businesses, and why so many struggle with it.
“Many leaders think they can change the strategy in closed meetings, announce the changes, give people a few orders, and the changes will be implemented. But it doesn’t work that way,” she says. Most people will just keep doing what they’ve always done unless they are given clear, consistent, and continuing information about the need for change, as well as support for making those changes happen.
“In addition, many organizations wait to change until it’s too late.” She says this happens because they are not proactive enough in monitoring the environment, and too complacent about the potential threats that they do discover.
The best-known example, she says, is the U.S. auto industry. The Big Three automakers dismissed inexpensive Japanese cars at first because they were of lower quality than cars made by Detroit. But eventually, Toyota and Honda got it right and when they did, she says Ford, Chrysler, and GM were caught flat-footed with cars that were outdated, poorly designed, fuel inefficient, and less reliable than Japanese models.
Why aren’t organizations more successful at getting change right?
There are lots of reasons. Sometimes it’s because company leaders interpret bad news as criticisms of their leadership, so they create a “shoot-the-messenger” culture where employees are afraid to speak up or challenge current practices. In other cases, it’s because organizational leaders don’t understand how important human issues are for successfully changing an organization. I’ve talked with human resource managers who have gone to their CEOs and asked, “How can we make this change? We don’t have enough resources, morale is low, we’ve lost people to downsizing, and those who are left don’t have the necessary skills,” and the CEO says, “That’s what I’ve got you for.” They have no idea how quickly human issues can stop organizational change dead in its tracks.
Another factor is that many leaders are focused too much on quarterly reports and short-term stock prices. In many cases, they’ve been forced into it because of the shareholder rights movement and pressure from investors for higher returns. In this type of environment, pension funds and investment banks move money around based on nothing more than current share price, and the needs of constituents other than shareholders—for example, customers and employees—
are ignored. In that kind of environment, businesses do things to make the short-term financials come out right while destroying future organizational capabilities through cuts to research, investment, and training.
What indications are there that an organization is in trouble?
Two big indicators are reduced sales and slipping market share. But the current strong focus on profits and share price mean that these measures of customer satisfaction or value often get ignored until things reach crisis proportions. Again, Detroit is a good example. They kept making big, gas-guzzling cars and trucks as customers shifted to smaller, more reliable, and more fuel-efficient cars because profits were much higher on big cars. They de-emphasized customer-based metrics in favor of measures focused on shareholders, but in the process created a business model that was unsustainable in the long run. In the short term, shareholders profited, but in the long-term, everybody suffered.
What are examples of companies that “get it,” when it comes to organizational change and human issues?
Southwest Airlines is famous for understanding how to motivate employees to continuously meet new challenges. They emphasize teamwork, can-do attitudes, and clear communications in all directions. Every employee knows exactly how well the business is doing at all times and how their individual actions translate into bottom-line results. This adds meaning to every Southwest employee’s job.
Louis Gerstner also “got it” when he was CEO of IBM. When Gerstner took over in 1993, IBM was in steep decline for having continued to emphasize mainframes while customers were increasingly turning to personal computers and networks. It was in such bad shape that everyone expected Gerstner to break the company up and sell the pieces, But rather than devising strategy in a closed room with only a few other top managers, he asked a ton of questions from customers to find out what they wanted and surrounded himself with people who would tell him the hard truths. In the end, he successfully shifted IBM from being mostly a hardware company to one focused on global information services.
Another good example is Interface, a company that manufactures carpet tiles. Their former CEO, Ray Anderson, decided one day that the company would be to become a carbon-neutral company that would eventually restore, rather than take from, the earth. Nearly 20 years into that effort, Interface has made massive reductions in their use of natural resources, harmful chemicals, and used carpet sent to landfills. Anderson provided the vision, but turned to his workforce for the implementation. His goal inspired Interface employees, who continue to work hard to further reduce waste and invent new products and business models.
What other industries are ripe to become victims of a disruptive force?
It’s hard to think of many industries that aren’t subject to disruptive forces. But clearly, the one we work in, higher education, appears to be on the cusp of disruption. You’re already seeing it, with companies like Capella and the University of Phoenix offering classes online at lower prices than traditional colleges and universities. There are still lots of things to be worked out before online higher education will truly disrupt on a large scale, but their likely impact shouldn’t be underestimated. Look at what email and Facebook have done to the postal service, what Amazon has done to independent bookstores, and what Flickr and iStock Photo have done to professional photographers.
We’ve put a man on the moon and a rover on Mars; someone is going to figure out a way to do it. The new companies and consortia coming online now, like Udacity, Coursera, and EdX, are likely to speed the transition. It won’t happen overnight, but the best thing universities can do is to closely follow the trend, conduct their own experiments with it, figure out where online makes the most sense right now, and partner with others to make the transition more efficient and effective. That’s the best chance we have of catching the wave, rather than being wiped out by it.