Why good companies go bad
When business conditions change, the most
successful companies are often the slowest to
adapt.
(Donald N. Sull 1999)
Session 7
Managing Organizational Change:
Strategies Revisited
Topics for Today
• Reflections on EIS simulation
• Strategies for change
– The implementation process
– Balanced scoreboard
• Why good companies go bad?
– Structural inertia
– Growth and strategic changes
• Conclusions
The implementation process
• A series of issues:
– Top-down vs. bottom-up
– Cultural vs. structural
– Intrinsic vs. extrinsic motivation
• A systematic change program
• The importance of implementation
Problems in implementation
• Examples
– The Smithers example
– Police in New York state
• Why?
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Interests and interpretation
Past experience and interpretation
Competition for attention
Multiple pulling/pushing forces in different
directions
– Implementation as a continuation of decision making
Balanced scorecard
• What is balanced scorecard
– Beyond single measure
– Generate balanced attention to important aspects
• Video
• But the experience at a large consumer
bank…
Balanced Scorecard at a large consumer bank
• The context
– The CEO’s intension
– The implementation: HRM – regional office –
branches
– The academic conference
• Problems in implementation
– Complex system of multiple indicators
– Implementation through bureaucracies
– Subjective versus objective measures
• Lessons –
Implementation with results
(Schaffer and Thomson 2000)
• Why results-driven, not activity centered?
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Keep the eyes on the ball
Discourage symbolic compliance
Push out of the comfort zone
Establish early wins
• Provide clear goals and mobilize resources to
carry out the change program
– Get resources/support ready
– Get employees involved
– Insert deadlines and demand measurable outcomes
Case study: Lincoln Electric in China
Background
• Lincoln Electric as a model of pay for
performance
– Measurable goals
– Intensity of incentive plan
– Remarkable results
• Does this model work for other industries or
other lines of work?
• What are the implications for international
management?
Questions for discussion
• How does LE’s management style and incentive
design fit the Chinese context?
• What is your view of LE’s efforts in its setup
process in China? Would you do anything
differently? Why?
• What is your recommendation for the next
step?
Summary and Conclusion
Question revisited:
Why do large, successful companies fail?
The case of Intel
• Background: Industry dominance
• The changing environment
– Multimedia beyond computing chips
• Why failure?
– Confined to expertise within own company
• The change of strategies
– From speed to new markets
– Challenges from competitors: A.M.D., Microsoft.
Overview of the course
Strategic
Culture
design Leadership
Agents
Recipients
Politics
Sharing experience:
What is your main lesson about managing
organizational change?
Why good companies go bad?
(Donald N. Sull 1999)
• It is not paralysis, not unawareness, not inaction.
• The inability to take appropriate action
• Active inertia – tendency to follow established patterns
of behavior, even when environment changes.
• Example: the Firestone Tire and Rubber Co.
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Dominant position in the early 1970s
Response to Michelin’s radial tire – old standards
Delay in phasing out bias tires
Lost market shares and dominance in the industry
Sources of active inertia
• Structure and interests
– Ford’s T-model
• Organizational filtering and interpretation
– The pooling of experience
• Competence trap
• In the time of change, past success can become
obstacle:
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Strategic frames  blinders
Processes  routines
Relationships  Shackles
Values  Dogmas
For mid-level managers
• Be clear what role you want to play
– Change agent?
– Entrepreneurial managers, early adopter, catalyst?
– Imitator, follower?
• Invest in your social capital
– Different networks for different purposes
– Mobilize resources
• Protect your interests
– Build coalitions
– Be adaptive
• Happiness belongs to optimists!
About final examination
• Format of examination:
– Essay questions (choose three of four)
• Discussion on business scenarios
• discussion on key issues/lessons in organizational change
• Contents to be examined:
– Cases discussed in class
– Key readings assigned for reading
– Issues discussed in class
Thank you and
enjoy the final exam!