Summary by Nick Sisto
Master of Accountancy Program
University of South Florida, Summer 2003
The purpose of this article is to examine how top leaders from Sears, Shell, and the U.S. Army were able to change the culture and behavior of their organizations. These three organizations were selected for their size, geographical diversity, complexity, and the fact that they have survived 100 years or more and retained their individual identities. All three of these organizations were in the process of decline when management initiated a dramatic change in culture and behavior. The authors have identified four measures that define an organization’s culture. They believe these measurements can be used as “vital signs” of an organization and a way to check on their health. These vital signs are as follows:
Power - Do employees believe they can affect organizational performance? Do they believe they have the power to make things happen?
Identity - Do individuals identify rather narrowly with their professions, working team, or functional units, or do they identify with the organization as a whole?
Conflict - How do members of the organization handle conflict? Do they smooth problems over, or do they confront and resolve them?
Learning - How does the organization learn? How does it deal with new ideas?
The authors identify three interventions that will restore an organization back to vital agility and then keep it in good health. These three interventions are:
1. Incorporate employees fully into the process of dealing with business challenges.
2. Lead from a different place so as to sharpen and maintain employee involvement and constructive stress.
3. Instill mental discipline that will make people behave differently and then help them sustain their new behavior into the future.
As an organization increases in age, size or complexity, it tends to exhibit deterioration in its vital signs. Employees tend to resign themselves to a lack of support from their superiors, they tend to lose their sense of teamwork, tend to avoid conflict and believe management is less receptive to new ideas. The authors describe the deterioration of the vital signs at Sears and how upper management ignored these signs. Their CEO Ed Brennan tried to revitalize and transform Sears by diversifying into financial services, launching the Discover Card and offering brand names items such as GE and Panasonic. However, Brennan was only partially successful as he neglected to change the culture of Sears. His successor, Arthur Martinez became famous for changing the culture and revitalizing the retail side of Sears. The authors provide examples of the change programs that were initiated for Sears as well as Shell and the U.S. Army.
A principal challenge facing today’s business is how to engage all employees of an organization to contribute to the solution of a pressing business problem. The Chairman of Shell, Chris Knight, demonstrates how his company utilized a technique called “valentines.” After identifying a controversial business challenge, Shell utilized this technique to get the entire organization behind the final decision. The valentine exercise is a vehicle for conflict resolution. Teams that have grievances with another team write down their concerns and send these “valentines’ to the other team. Each team focuses on two of these valentines and develops a detailed plan for corrective action. A partner from each team is selected and responsible for making the new solution work.
Leading from a Different Place
Another challenge facing business today is the requirement of leaders to operate outside of their comfort zone and accept ambiguity and adversity. Maintaining healthy levels of stress and not feeling compelled to come to the rescue with a lot of answers will invariably allow “guerrilla leaders” at lower levels to come forward with initiatives that address the company’s shortcomings. An example of this new way of viewing leadership is Arthur Martinez at Sears. For years the leaders at Sears had been lying to themselves, they continually set their goals lower and lower until they were at the brink of disaster. Arthur Martinez set difficult goals for top-level management and refused to give them the answers on how to obtain them. Sears’ management had to create the answer based on what Martinez provided them, which was truth, urgency and enough productive stress to change thinking and behavior.
Instilling Mental Disciplines
Obtaining change may only be half the battle, a concerted effort must be made to sustain the mental attitude required to alter the company’s culture and behavior. An example of how the U.S. Army instills mental disciplines and transforms the thinking and behavior of its leaders is at the National Training Command. Over a two-week period an entire organizational unit goes head-to head with a competitor of like size in a simulated battle. Every member that has supervisory responsibility is assigned an observer/controller, which shadows him or her throughout their 18-hour day. After the battle these observer/controllers facilitate a debriefing referred to as an After Action Review (AAR). These AAR enable the members of the engagement to see how their orders are carried out and how they affect other members of the unit.
Seven disciplines have been embedded in the After Action Review and are just as relevant to business. These disciplines are identified below:
1. Build an intricate understanding of the business.
2. Encourage uncompromising straight talk.
3. Manage from the future.
4. Harness setbacks.
5. Promote inventive accountability.
6. Understand the quid pro quo.
7. Create relentless discomfort with the status quo.
While these three companies have been successful at bringing change and revitalization to their organizations, others have not been so successful. Researchers have tracked the impact of change efforts among the Fortune 100 companies. They found that only 30% of change programs produced an improvement in the bottom-line results and only 50% led to improvement in market share price. While these statistics are not encouraging, the authors demonstrate that a complete revitalization of organization culture can be achieved and sustained. However, change requires the complete commitment of every member of the organization not only a selected few at top-level management.
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