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Copyright2006StephenMaffei IntegratedElementsInc.Allrightsreserved.Nopartofthisdocumentmaybereproduced,storedortransmitted,in

wholeorinpart,inanyformorbyanymeans,withoutpriorwrittenpermissionfromIntegratedElementsInc..www.integratedelements.com

1

TheLongTermConsequencesofOrganizationalMyopiaExaminingKeyComponentstoCorporateSustainabilityviaInformalMetaAnalysis

byStephenMaffeiIntegratedElementsInc.

Abstract

Whenattempting

to

pinpoint

the

root

causes

of

the

current

issues

plaguing

the

U.S.

automotive

industry,

the commonly identified culprits are aggressiveforeign competition,unfavorable economic conditions,

inferiorproduct quality, or a lack of appealing, innovativeproducts. Each can significantly impact

consumerdemandandrequiredramaticcostandefficiencyactionstobeundertakeninorderensurelong

termsurvival.Althoughthesituationcurrentlylooksbleakforsome,othersintheindustry(mostnotably

Toyota,Honda,andBMW)remainhealthy,thrivingandexpanding.Couldtheessenceoftheproblems

facingtheU.S.basedautomotivecompaniesbefoundatamorefundamentallevel?

Basicmanagementpracticessuchaspreservingastrongfocusonthecompanyslongtermmissionand

vision, maintaining a vigilant awareness of customer needs, executing wellcommunicated, fully

adaptablestrategicactions tied to thevision,andhavingadedicated,challenged,accountable,talented,

and engagedworkforce inplace to execute theseactionswould seemcritical to successfullynavigating

through times of significant challenge. Yet it appears that it is atprecisely those times that these

fundamentalsareoftenabandoned infavorofa.) short term strategies thatare rarelyconnected to the

companys vision or long termgoals, b.) kneejerk responses to competitive threats, c.) dramatic and

largescale initiatives designedfrom the top down in order togainground back quickly, and/or,most

notably,d.)aretreattothecommandandcontrolstyleofmanagementandcommunication.

Whensignificantunforeseenchangesoccur,somecompaniesseembetterpositionedtohandlethemthan

others.Sixpotentialreasonsforwhyanorganizationencountersdifficultiesarepresented:a.)ithaslost

trackofitscustomersneeds,b.)itisresistanttochangeorisvigilantlymaintainingthestatusquo,c.)it

haslost

sight

of

its

long

term

vision,

d.)

it

has

failed

to

make

longer

term

thinking

the

cornerstone

of

its

success/survival,e.)ithasfailedtoimplementeffectiveshorttermactionsthatarealignedwithitsvision

andlongtermgoals,andfinally,f.)ithasfailedtohaveanengagedworkforceinplaceduringtheperiod

of significant change or instability.A closer look is taken at the impact of significant actions such as

downsizing,restructuring,andoutsourcing.Theevolvinglossofemployeeloyaltyisdiscussedatlength,

alongwitha listofsixproposedkeyorganizationalshortcomings that leadtoemployeedisengagement.

Theyare theorganizations:a.)failure to recognize the importanceofemployeeretention,b.)failure to

payproper attention to true employeeneeds and requirements, c.)failure toprovide opportunitiesfor

growththroughcontinuouslearninganddevelopment,d.)permittingoftheproliferationofdumbjobs,

e.)failuretovigilantlynurtureacorporateculturethatsupportsemployeemotivation,andf.)placement

of

limitations

on

an

employees

ability

to

shape

the

future

of

the

organization.

Organizations,regardlessoftheindustrytheyarein,willstumbleiftheydonothavethestrengthand

agilitythatanengagedworkforceprovideswhendiscontinuitiesarise.Thusfar,thepubliclyannounced

recoveryplansofthemajorU.S.automanufacturersdonotappeartocontaincomprehensiveapproaches

toreengagingtheirworkforces.Therefore,theirabilitytoexecutelongterm,sustainablevisions ishighly

questionable.


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2

IntroductionWhenTheGoingGetsTough

InobservingthestrugglesfacingtheU.S.automotiveindustryoflate,onecannot

helpbut

wonder

how

the

situation

could

get

so

dire

so

quickly.

With

restructuring

plansthatfeaturelargescalelayoffs,keycomponentselloffs,plantandofficeclosings,

benefitcuts,andeven talkofbankruptcy, it ishard to imagine that,justa littlemore

than six years ago, both General Motors and Ford were healthy, thriving, and

expanding. Among the largest corporations in the world, they have managed to

weathermanyupsanddowns.Theyhavesurvivedinbothgoodandbadeconomic

climates.Theyhavebothhadtheirshareofproductofferingsthateithera.)disappear

quicklyinthemarketplaceduetopoorqualityorlackofcustomerappealorb.)become

the cutting edge vehicle everyone desires and wants to drive. So what makes the

situationsodifferentnow,in2006?Aretheseproblemsemanatingfromsomenewand

unknownsource,orhavetheseorganizationsallowedasetofunderlyingissuesatthe

coreofthesecurrentstrugglestodevelopgraduallyovertime,sothatultimatelythese

companiesweresimply illprepared tohandleanydramaticchanges to theirbusiness

environment?

It is intriguing to note that,while the level of desperation is running high in

Detroit,otherkeyplayersintheautoindustry(mostnotablyToyota,Honda,andBMW)

are, in fact, healthy, thriving, and expanding. In lateMarch of 2006, Toyota saw its

marketvalueexceed$200billionforthefirsttime,surpassingWalMartastheworlds

eighthlargest

company

by

capitalization

and

the

world

ssecond

largest

manufacturer

byvalue,afterGeneralElectric.iInJulyof2006,ToyotaMotorCorp.passedFordMotor

Co.insalestobecometheNo.2automakerintheU.S.forthefirsttime.ii


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3

ToattributetheplightofthelargestU.S.automanufacturerslossofmarketshare

toomnipresent,aggressivecompetition isoneexplanation,but thishypercompetitive

environmenthasbeenastaple in themarketformanyyearsnowandreallydoesnot

representa sea change.Attributing inferiorqualityand lackofappealing, innovative

products as the chief root causes for low consumer demand and production

overcapacitywouldseemtheeasyandlogicalexplanation.Highcostandlowefficiency

areperennialcandidatesfortheproblemsneedingresolutionfortheindustrytosurvive

longterm.Strainedrelationsandinflexiblecontractswithlaborunionshaveresultedin

significant(andincreasing)laborandhealthcarecosts.Anotherchargeroutinelymade

in

the

trade

and

mass

media

is

that

there

is

a

general

lack

of

focus

on

customers

current

wantsandneeds.Althougheachofthesefactorscontributestothemarketshareloss,

perhapssomethingdeeper isoccurringand therootof thisproblem isntparticularly

uniquetotheautomotiveindustry.

ThecorporatecultureatToyotahasbeendescribedbyDr.JeffreyK.Liker,asnot

focusedonshorttermfinancialgoals,butrather,asstrategicallyfocusedonalongterm

missionofcreatingunendingcustomerloyaltyandsatisfactionandasingularvisionof

the companysperpetual survival andgrowth in an extremelyvolatile industry.iii Its

mission attaches a high premium on the ...stability and wellbeing of its team

members and places a particularly strong focus on maintaining trust with its

employees.(8081)ivAtToyota,...asenseofmissionandcommitmenttoitscustomers,

employeesandsocietyisthefoundationforallotherprinciples.(72)v

Anotherrecentarticle(focusedspecificallyonFordsturnaroundplans)pointsto

the fact that, even inside theU.S., Toyota leads allNorthAmerican auto and truck

makersinproductionefficiency.viWhatdistinguishesToyotafromtherest?Thearticle


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4

citesAllanWilson,anAustin,Texasbasedmanufacturingconsultanttotheautomotive

industry:Therecanonlybeoneanswer:Themanagement teambehavesdifferently,

andtheworkforceacceptsthat.TheproblemdoesnotliewithAmericanworkers.Its

thewaythoseworkersaremanaged.vii

Inasimilarvein, retiredGeneralElectricCEOJackWelchcontinues toextol the

fundamentalimportanceofboundarylessorganizationsdevoidofthebureaucracythat

slowsmostbig companiesdown.viiiWithnimble,delayeredorganizations,youhave

thebenefitsof speed, enthusiasm, an entrepreneurial spirit, and above all, employee

accountability.

Empowering

workers

at

all

levels

of

the

organization

to

a.)

get

the

informationtheyrequirequickly,b.)makeinformeddecisions,andc.)feelcomfortable

communicating directly with all key corporate stakeholders unencumbered by

bureaucratic roadblocks, ensures optimum organizational execution and remains a

hallmarkvalueinthepostWelchGEoftoday.ix

Inadditiontotheoftdiagnosedfactorssuchasadoptingamuchkeenerfocuson

buildingmorecustomerdesirablevehiclesandassumingatrue,longtermcommitment

toquality,dothetrulysignificantproblemslieatamorefundamentallevel?Couldlong

range, backtobasicsconcepts suchasmaintaininga strong focuson the companys

longtermmissionandvision,andexecutingwellcommunicatedstrategicactionsthat

are firmly tied to the vision yet are fully adaptable to changes in the business

environment, aswell as possessing (and fully leveraging) a dedicated and engaged

workforcetoexecutetheseactions,bethekeycomponentsmissingfromtheU.S.auto

manufacturers which find themselves in such a desperate position today? Could

transforming the most steadfastly bureaucratic organizations into boundaryless

environments that encourage employee empowerment, engagement, freedom, and


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5

accountabilitybethecritical ingredientthat ismissing,andcouldthisenvironment in

itselffosterlongtermemployeecommitment?Acloserlookisinorder.

ThingsWere

Going

Great

and

Then

Whenacompany finds itself inaperiodofprosperityorgrowth,amultitudeof

issues and structural problems are easily ignored and can go undetected. Many

companiesinthismodeareabletosweepalargenumberofsystemicailments under

the rugby diagnosing them as attributable to rapid growth or to growing pains.

Deeper issues regarding currentworkforce satisfaction or companymission/strategy

tend

to

be

overshadowed

by

the

distractions

of

quickly

hiring

additional

staff

and

servicing the immediatespike inbusinessneeds. Inmanycases,decisions thatwould

normallybedelayed, overscrutinized, andperhaps even rejectedbybureaucracy or

evaluative analysis, are quickly pushed through with little formal analysis or

discussion,utilizingthefactthattheburgeoningcustomersimmediateneedsmightbe

more rapidly/favorably met as justification. This can potentially give the internal

(workforce,management)andexternal(shareholders,customers)worldtheimpression

thatthecompanyismuchmorenimbleandpreparedthanittrulyis.

Unfortunately,whenthebusinessoreconomicclimatebecomesmorechallenging

(or downright disconcerting), these issues raise to the surface and begin to erode

shareholder, customer, and managerial confidence like emerging cracks in the

foundationofabuilding. InPaulStrebelsbook,Breakpoints:HowManagersExploit

Radical Business Change, he notes that breakpoints, or sudden radical changes in

businessconditionsthatresultinbusinessdiscontinuities,arecausedbythingssuchas

fluctuating economic conditions, rapidly emerging new technologies or innovations,

changes in customer preferences., or political/social unrest.x In Confronting Reality,


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6

LarryBossidyandRamCharandescribethesamephenomenonasunforeseenchanges

to their external realities.xi Likewise, former IntelCEOAndrewGrove, inOnly the

ParanoidSurvive,utilizedthetermstrategicinflectionpointtodescribeamonumental

change or event that causes organizations to have to fundamentally change their

businessstrategy.xiiInobservingthoseorganizationsthatwereunsuccessfulinhandling

this typeofunforeseen radicalchange,Strebelpointsout thatmostcompanieseither

didnotseeitcomingorweresimplyunabletocopewithiteffectively.xiii

Asdemonstratedfromourinitialexampleoftherecenteventsintheautoindustry,

certain

companies

consistently

position

themselves

better

than

others

to

cope

with

these

significant adverse events.Why do some companies have difficulty handling these

significantchangesintheirbusinessenvironments?Sixpotentialreasonsarepresented

forconsideration.Theyare:

Theirorganizationhaslosttrackofitscustomersneeds Their organization is resistant to change or is vigilantly

maintainingthestatusquo

Theirorganizationhaslostsightofitslongtermvision Theirorganizationhasfailedtomake longertermthinkingthe

cornerstoneofitssuccess/survival

Theirorganizationhasfailedto implementeffectiveshorttermactionsthatarealignedwithitsvisionandlongtermgoals

Theirorganizationhas failed tohaveanengagedworkforce inplaceduringtheperiodofsignificantchangeorinstability


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7

1. TheirOrganizationHasLostTrackofItsCustomersNeedsThiswouldseemtobe themostobviousdriver. InhisbookValueMigration,AdrianSlywotzky

explains that the key priorities of a companys customers tend to change

naturallyovertime,butonceestablished,thewayacompanyprovidesvalueand

utilitytothatcustomerinordertomakeaprofit(theirbusinessdesign)tendsto

remain fixed.xiv As a result, as customers needs and priorities change, and

...valuemigrates fromoutmodedbusinessdesigns tonewones thatarebetter

able to satisfy customers most important priorities.(4)xv For example, the

averagepurchaserofanewdomesticsportutilityvehicle(orSUV)in2004would

probably

not

have

anticipated

the

extent

to

which

fuel

prices

have

rose

by

mid

2006.Itdidnottakelongforcustomerprioritiestoshift.Unfortunately,thekey

domesticautoproducerstakefar longertoadapttochangesofthismagnitude.

Therefore,itiscriticalforcompaniestospendasubstantialamountofresources

onmonitoring customer priorities, in order to anticipate shifts at the earliest

possiblemoment. In addition, theymust explore potential priorities that the

customer has not even thought of yet, modeling and preparing potential

alternativescenariosinordertoprovidethemaximumamountofflexibilityand

contingencyifconditionsdodrasticallychangeinthefuture.

Tocomplicateissuesfurther wheretheinformationaboutcustomerneeds

(metorunmet)isderivedcanalsobeproblematic.Forexample,ifadistribution

channel is theprimarysourceforcustomerfeedback, this informationcouldbe

staleasinformationdoesnotalwaysflowthroughthesechannelssmoothlyand

manyarenotdesignedorequippedtogatherconcise,actionabledata.Thedata

mightevenbepurposelyfilteredtoreflecttheuniqueneedsofaspecificchannel.


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8

Although cost can sometimes be a limiting factor, lack of an effective

methodtomaintainastrongunderstandingofcustomersrequirements(needs,

wishes,likes,anddislikes,etc.)andtobeabletocommunicatethisinformation

throughout theorganizationmakesmany companies illprepared fordramatic

changesinbusinessconditions.

2. Their Organization is Resistant to Change or is Vigilantly Maintaining theStatus Quo In linewith losing touchwith the customers requirements, the

secondpotentialreasonistheexistenceofastrongcorporateculturethatresists

making

the

necessary

changes

required

to

continuously

meet

or

exceed

their

customersneeds.Therecanbeanumberofreasonsforthischangeaversion.

Strebel specifies four primary sources when describing the corporate

resistance tochange:a.)a closedattitudeculture throughout theorganization

(based on either delusions of past successes, stronglyingrained corporate

strategies, or the pervasiveness of a not invented here attitude within the

organization), b.) a thoroughly entrenched corporate culture (which, if it is

possible to truly change, takes a greatdeal of time and effort tounlearn and

relearn), c.) the prevalence of excessive structure (organizational, industry,

stakeholder) and business system rigidity, and, finally, d.) the existence of

counterproductive change dynamics (such as the impact of a previous failed

changeeffort).(5157)xvi

In many cases, companies that are most likely to struggle with change

aversionarethosethathaveachievedahighlevelofpastsuccess,duetoastrong

corporatevisionandaccompanyingstrategy.BusinessstrategyconsultantRoger


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9

Martinpointsoutthattheproblemsoccurinanevolutionarymannerovertime,

beginningwith a strongly articulated vision from the top of the organization,

soonfollowedbytheinstitutionalizationofthevisionintosteeringmechanisms

which help to keep the company aligned with the vision (and economic

environment).xvii The problem arises, though,whenmarkets vary or a change

occurs in customer needs. Over time, the companys steeringmechanism, in

Martins terms, becomes hardwired to the original strategy, and acts as a

preventativeforceforadaptingthestrategytothenewmarketconditions.xviiiThe

strengthof theexisting steeringmechanismpreventsmostvital feedback from

getting

back

to

the

organization

and

that

which

does

is

greeted

with

defensiveness.xix

PaulTaffinderusedNASAintheearly1990stohelpillustratethepoint.He

pointsoutthattheHubbletelescopehadfailedduetomanufacturingmistakes,

missedopportunitiestoapplysimplesolutionstotheproblemsencountered,and

a lackofcertainqualitychecksatkeypoints in theprocess.xxThepostmortem

analysisshowedNASAwasclearlylessinclinedtorecognizeitsfaultsandneed

to transformandwasmore interested inavoidingany controversy thatwould

threatentotarnishtheexceptionalreputationoftheirteamororganizationasa

whole.xxi In other words, a culture of pride can exist so strongly in some

organizationsthatquestioningthestatusquoorraisingacriticalissuethatcould

potentiallycastanegative lighton its trackrecordwouldnotbeviewedwith

encouragementorappreciation.Regardingthesenseofcorporate contentment

thatpast successes canbreed,MichaelDellonce commented that selfcriticism

was key to Dell Computers success.xxii If you sat in on our management


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10

meetings, he said, ...you would find that we are a remarkably selfcritical

bunchwithadisdainforcomplacencythatmotivatesus.xxiii

Anotherreasonforchangeresistanceisthattheorganizationitselfcansimply

betiredofchangeinitiatives,particularlyiftheworkforcehasfailedtoseeany

tangible results from past efforts.AuthorJeanieDanielDuck emphasizes the

destructivenessofpreviousfailedchangeeffortstotransformationeffortsinthe

future.xxiv She states that ...when a stagnating company attempts one change

effort after another, and repeatedly fails to achieve any lasting result, two

damaging

things

occur:

management

loses

credibility

and

the

rest

of

the

workforcebecomeschangeresistant.(43)xxv

Finally,inhisbookWhyCompaniesResistChange,CharlesFombrunstates

that, overall, companies generally failbecause of powerful inertial forces that

make it difficult for their management to detect when there are impending

threatsrequiringaction.xxviThis inertiacausesorganizationstoentrench intoa

stable,changeimpedingtrajectorythatgraduallybuildsmomentumuntilrapid

strategic direction adjustment becomes virtually impossible when the

environmentrequiresit.xxviiFombrunbelievesthatthisinertiaisderivedfromthe

firmsinternalcapabilitiesandsupportingcontrols,aswellasitsculture,because

they...seducemanagerstooptforthestatusquo,favoringestablisheddirections

that proved successful in the past.(67)xxviii He also states that a companys

interactions with its business communities and relationships with various

institutions(media,government,WallStreet,unions,etc.)strengthenstheinertia

(andassociatedmomentum).xxix


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11

3. TheirOrganizationHasLostSightofItsLongTermVisionEvenwhentimesare good, the purpose of an organizations vision is widely misunderstood

throughoutacompanyand,inmanycases,renderedmeaninglesstotheaverage

employee inhisorherdaytodaywork.Butacorporatevision ismuchmore

than an exquisitely crafted statement created for shareholder and employee

literature;itis(orshouldbe)whatthecompanyisallabout.PeterSenge,inhis

landmarkwork,TheFifthDiscipline,writesthatWhenthereisagenuinevision

(asopposedtothealltoofamiliarvisionstatement),peopleexcelandlearn,not

becausetheyaretoldto,butbecausetheywantto.(9)xxx

Moststudentsofbusinessagreethat,initssimplestform,acompanysoverall

directionalvisionshouldsimplyandconciselyreflectwhythecompanyhasbeen

formed(itsmission),whatitsfundamentalbeliefsare(itsvalues,fromwhichits

corporateculture isderived),andwhat itultimatelywantstobe (itsvision). In

Good toGreat, authorJimCollinsdescribeshisuniqueviewof avision in its

simpleformasthehedgehogconcept,whichisfoundattheintersectionofthe

answers to threekeyquestions What can [your company]be thebest in the

worldat?,Whatdrives[yourcompanys]economicengine?,andWhatis[your

company]deeplypassionateabout?.(9596)xxxiRobertKaplanandDavidNorton

viewtheestablishmentofacompanysvisionasoneofthecriticalinitialstepsin

acontinuumfromconcept(mission,values,vision)tostrategicexecution(work

performed).xxxiiDonnaNeuschandAlanSiebenalerpositthatacompanysvision

should establish its broad goals and possibilities for the future that will

...resonateviscerallywiththeorganizationsemployees,whilebuildingonthe

companysvaluesandmission.(51)xxxiiiTheyholdthatavisionstruevalueliesin

theassumptionthata...companycanachievewhatitcanconceive.(51)xxxiv


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12

CollinsandPorras,intheirbookBuilttoLast,expandontheconceptofvision

bybreaking itdown further into twodistinct components; the core ideology

(thefirmscorepurposeandvalues)andthe envisionedfuture(whatthefirm

ultimately aspires tobecome, to create, or to achieve).xxxvWhat is particularly

noteworthyistheirconclusionthattrulysuccessfulcompaniesneedtomaintain

abalancebetweenpreservingtheirfixedcoreideology,whileconstantlymoving

toward their aspired goal and adapting to a rapidly changing business

environment.xxxviA good corporate vision ...builds on the interplaybetween

these

two

complementary

yin

and

yang

forces,

clearly

defining

the

non

changing core ideology,while setting forth avisionof the futurewhichwill

require much change and progress to achieve.(221)xxxvii Wacker, Taylor and

Means state thatwhat is critical to authentic vision is that, ...in the face of

knowingforsurethattheworldisgoingtochange,anorganization,companyor

an individual aspires to change with it and stay the same

simultaneously.(10)xxxviii

Whentimesarechallenging,though,manycompaniesfindquicklyadjusting

theirstrategytobeveryeasyandstayingtruetoagenuinevisionverydifficult,

particularlywhen facingexternalpressures fromstakeholdersandmarkets, for

example.IraJacksonandJaneNelson,intheirbookProfitwithPrinciples,point

out that When the going gets tough, profits fall, competitors bite, and the

economymovesdownward,manypeoplefeelthatacompanysfineaspirations

and good intentions are the first thing tobejettisoned.(321)xxxix Although a

visionskeypurpose is tohelp clarify thedirection inwhich theorganization

needstomove,JohnP.Kotterstatesthat,inmanymajorfailedcorporatechange


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13

initiatives, you will commonly find ...plenty of plans and directives and

programs,butnovision.(63)xl

Ontheotherhand,organizationsthatremaintooattachedtotheirvisionand

values and inflexible to the changing customer environment could easily find

themselvesobserving, asSlywotzkyputs it, a valuemigration inwhich their

customerswillsimplygoelsewheretogetwhattheyneed.xliTake,forexample,

thedownfallofDigitalEquipmentCorporationinthelate80s/early90s.Inthe

book,DEC isDead,LongLiveDEC:TheLastingLegacyofDigitalEquipment

Corporation,

the

authors

state

that

Digital

Equipments

demise

in

the

late

1980s

couldactuallybeforeseenbytheorganizationsactionsobservedasfarbackas

the1960s,andthatmuchofthedifficultyiteventuallyranintowas...endemic

to successful growth anddifferentiation,based on a culture andmanagement

system that employees really liked, andwanted topreserve atall costs.(10)xlii

Paul Strebel adds that deeprooted organizational strategies are typically

unresponsive to changes in the business environment because they actually

...formabasisforrationalizingawaytheimportanceofthesechangesandadds

that...thechangesimplydoesnotaffectthebusinessasdefined.(52)xliii

Manytimes,organizationsfailtoconverttheirconceptualvisionandvalues

into actionable, operational principles. Peter Stephenson suggests that these

failuresoccurprimarilybecauseeithera.)thevisionandvaluestatementsmany

times contain too many extraneous components that weaken the impact or

comprehension, orb.) themanagement simply fails to uphold the vision and

valuesintheirdaytodaywork,viewingthemaseitherunrealisticorcreatedfor

the outsideworld.xliv The latter can actuallymakemattersworse.Peter Senge


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14

notesthatavisionwhichisnottrulyalignedwiththegenuinevaluesthatpeople

in the organization actually live (andwork)by each daywill not only fail to

inspire and enthuse the workforce, but ...will often foster outright

cynicism.(223)xlvSimplyput,itwouldseemimpossibletodevelop,execute,and

adapt effective strategies for achieving a companys long term vision (or a

significantorganizational transformation) if thatvisioneitherdoesnotexist, is

ineffective/vague,orisnotclearlyunderstoodandembracedbythecompanyas

awhole.

4.

Their

Organization

Has

Failed

to

Make

Longer

Term

Thinking

the

Cornerstone of Its Success/Survival Moving back to the concept of

maintaining the necessarybalancebetween staying faithful to the companys

visionatall times,yetbeingabletoanticipate,accept,anddealwith inevitable

changealong theway Whydo somecompanies thatappear tohaveavision

and are going strong, falter at the occurrence of a dramatic change in the

businessenvironment?

Oneprimaryreasoncouldbetheshorttermismthatisprevalentinmostof

todaysbusiness thinking.Pressures toquickly fix a situationbroughtonby

customer indifference,new competitor threat,or the critical eyeofWallStreet

caneasilycausea rapid reactive response,whichmaynotvitiate theproblem,

and, in fact, couldmake the situationworse.MikeFreedman, inTheArt and

Discipline of Strategic Leadership, explains that taking a reactive, short term

(operational)focusisatemptingapproachbecauseitcontainstheseductiveness

ofquicklygettingsomethingaccomplished.xlviHowever,thiscanoftenbedoneat

theexpenseofachievingtheorganizationssharedvisionandlongtermgoalsfor


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15

the future.xlvii Many organizations get so caught up in dealing with current

issues, (e.g., the daytoday operational firefighting, the minor competitive

threats, etc.) that they can easily lose sight of their long term vision. David

Aacker, author of Developing Business Strategies, adds that an organization

requires persistence in order to stand by its strategic vision when facing

temptingdistractions.(151)xlviiiHeadds,Italsorequiresdisciplineandeye

ontheball focus.Visions thatareexcessivelydynamicareno longervisionsat

all.Thereisaveryrealriskofcapsizingwhentryingtocatchthewave.(151)xlix

In

an

article

on

Salon.com,

Andrew

Leonard

further

illustrates

this

point:

Back inthe90s,bothFordandG.M.wouldhavebeenwelladvisedto

prepare for the obviously imminent era of high oil pricesbybringing to

market stylish, fuelefficient vehicles instead of rolling out ever more

humongousSUVs.ButWallStreetdoesntrewardcompaniesforlongterm

thinking it alwaysputs thepremium onwhatisyourstockpricedoing

formenow.(Leonard,2006,2)l

Inanearlierarticle,hecommentsthatwhileFordandG.M.werereapingthe

profitsfromtheSUVsales,ToyotawaspouringR&Dintonewdesignsdestined

toflourishinanincreasinglyenergyconsciousworld.Andnowtheycantmake

Priusesfastenough.(Leonard,2005,7)li

Butthisisnottosaythatcompaniesneedtoremainunwaveringlytruetoa

long termvision if thatvision is simplyunrealisticgiven thecurrentlyknown

facts. Although all organizations should pursue their long term vision, Jim


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16

Collins also points out that those sustainably successful companies that he

highlightedinGoodtoGreat...continuallyrefinedtheirpathtogreatnesswith

thebrutalfactsofreality.(71)lii

Inaddition,alackofcontinualanalysisandinformationtransferrequiredfor

theongoingrevisitingandmodifyingofstrategysimplydoesnotoccurinsome

companies. This canbe due to an unreceptive or inflexible corporate culture,

absenceofresources,ortheinabilitytocommunicatefindingseffectively.

When

speaking

of

strategy

and

planning,

images

of

a

formal

process

occurringatfixedtimesinthebusinesscycleprobablycometomind.Thistype

ofstrategyformulationtendstobemostsuccessfullyaccomplishedduringtimes

ofstability.Inactuality,moststrategiesaredevelopedasaresponsetosometype

of instability (goodorbad) thatoccurs in thebusinessorgeneralenvironment.

HenryMintzberg,inhisbook,TheRiseandFallofStrategicPlanning,statesthat

theprocessofstrategymakingmustalwaysbedynamic,preciselybecauseit

is about change and one can never know when or how environments will

change.(244245)liiiDavidAackernotesthat...strategiesand[the]indicatorsof

theneedtochangethemshouldbecontinuallymonitoredtoavoidbeingtiedto

anannualplanningcycle.(33)liv

Somearguethatthereareseriousdownsidestoaformal,structuredstrategic

planningprocess.JeffreyPfeffer andRobertSuttonpointout that thisprocess

causesorganizationstoincuradditionalcostinresourcesanddivertsmanagerial

attentionawayfromsolvingpressingoperationalproblemswhilethisplanning

occurs.lv They point out that even employing a formal strategy at all can a.)


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17

reduceacompanysabilitytoeffectivelymonitorthecompetitivelandscapeand

b.)limittheirflexibilityinadaptingtounstableenvironments.lvi

Finally,somefeelthatthemostimportantcomponentofstrategytendstoget

forgottenintheplanningprocess;ensuringthattheultimategoalofthestrategy

is tied to the longer termgoalsof theorganization, andultimately, itsvision.

PeterSenge:With itsemphasisonextensiveanalysisofcompetitorsstrengths

andweaknesses,ofmarketnichesandfirmresources,typicalstrategicplanning

fails to achieve the one accomplishment that would foster long range

actions.(210)lvii

Yetinsomecompanies,allthisdiffers.PeterSchwartz,inhisworkTheArtof

theLongView,points out thatmanagers at companies such asMotorola and

Rubbermaidarecontinuallyinvolvedinacollectiveinquiryoftheirbusiness

andhowitischanging,andthatpeopleattheseforwardmindedcompaniesare

continuouslydiscussing the future inastrategicmanner.(221)lviii Insomecases,

companies that face these periods of change view them not with stress and

anxiety, but as learning opportunities to improve and refine their strategy.

Mintzbergdescribesthephenomenon:

Visionsetsthebroadoutlinesofastrategy,whileleavingthedetailsto

beworkedout.Inotherwords,thebroadperspectivemaybedeliberate,but

specificpositions can emerge.Sowhen theunexpectedhappens,assuming

thevisionissufficientlyrobust,theorganizationcanadapt itlearns.Certain

changeisthuseasilyaccommodated.(209210)lix


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18

Theconceptofa learningorganization isnotanewone.It isbasedonthe

fundamentalassumptionthatorganizationsasawholemustcontinuouslyadapt

and learn in order to effectively respond to future changes in business

conditions that result in business discontinuities and to ultimately achieve

sustainablesuccessand togrow.WatkinsandMarsick, in theirbookSculpting

theLearningOrganization,state that this learningoccursat theorganizational,

team, and individual level, and can even takeplacewithin the community in

whichtheorganizationdoesitsbusiness.lxTheygoontodescribethatLearning

isastrategicallyusedprocess integratedwith,andrunningparallelto, work.

Learning

results

in

changes

in

knowledge,

beliefs,

and

behaviors.

Learning

also

enhancesorganizationalcapacityforinnovationandgrowth.(89)lxiPeterSenge

stresses that, in our fastmoving/changing, hypercompetitive, complex and

interconnectedworld,organizationsno longerhave the luxuryofbeingable to

incorporate a top down strategy setting model that, once the strategy is

formulated,itissimplydistributedtotherestoftheorganizationforexecution.lxii

Organizations must be constantly learning, adapting, restrategizing, and

executing at all levels of the organization, in order to meet the competitive

challenges faced today.lxiii Senge states that The organizations thatwill truly

excel in the futurewillbe theorganizations thatdiscoverhow to tappeoples

commitment and capacity to learn at all levels in an organization.(4)lxiv This

ultimately gives way to a fundamental advantage: greater organizational

capability. As Watkins and Marsick explain further, If people are learning

continuously, the overall skill threshold of the organization improves, and

greaterreservesarecreatedinthelearningsystem.Asaresult,thecapabilityof

theorganizationtorespondtochangeanddonewthingsimproves.(160)lxv


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19

Almost allgreat accomplishments take time andpatience, and simplyput,

manycompaniesdonotseemtopossessthedisciplineandresiliencetostandby

theirgoalsandvisionwhenthegoinggetstough.JimCollinspointsoutinGood

toGreat(indescribinghisflywheelconcept),thatorganizationsthatareableto

successfullyachievesustainable greatnesshavedonesobyfollowingasteady

buildingup period followedby a clearly recognizablebreakthrough.lxviAs he

observedinallofthesustainablysuccessfulcompaniesprofiledinhisbook,the

corporate transformations were a ...quiet, deliberate process of figuring out

whatneededtobedonetocreatethebestfutureresultsandthensimplytaking

those

steps,

one

after

the

other

(169)lxvii

Someorganizationsthatwereoriginallyfocusedontheirlongtermobjectives

have,over time, lost touchwith theirvision andneed to reconnectwith their

goalsandassociatedstrategies.Onekeyculpritinthefailuretoremainontrack

isthe lackofaneffectiveandrobustmethodologytomeasuretheirprogress in

doing so.Kaplan andNorton suggest taking a balanced scorecard approach,

which compiles all key vision, goal, and strategyrelated financial and non

financialobjectivesandtheirassociatedmeasurementsinonecentrallocation,in

orderforthemtobemonitoredbytheentireorganization.lxviiiThescorecardcan

thenbeusedforgeneralorganizationcommunicationandclarificationofvision,

goalsandstrategies,progressmonitoring,newstrategydevelopmentandeven

thevalidationofstrategyeffectiveness.lxixAnotherculpritisthecommonpractice

inmostorganizationsofbasingtheirmanagementscompensationsolelyonthe

achievementofshorttermgoals.AccordingtoFombrun,Tichy,andDevannain

StrategicHumanResourceManagement, trulyeffectiverewardsystemsshould


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20

take a balanced approach in supporting both long term and short term

organizationalgoals.lxx

Otherspropose simply focusingon the hereandnowversusdwellingon

what caused them to lose track in the first placeby taking a back tobasics

approach to getting back in touch with an organizations vision and goals.

MichaelPortersuggestslookingcloselyatwhatthecompanyiscurrentlydoing

and pinpointing which products or services are most distinctive and/or

profitable,which types of customers aremost satisfied and/or profitable, and

what

activities

in

the

companys

value

chain

are

most

unique

or

effective.lxxi

Michael Treacy and FredWiersema, in theirbook The Discipline ofMarket

Leaders, propose identifying the organizations single key value discipline

(providegoods at lowest cost, create innovativeproductsorprovide excellent

customer service) andpursuemarket leadership in that area.lxxiiAll long term

goalsandassociatedstrategiesshouldbederivedfromthechosendiscipline.lxxiii

Generally speaking, many difficulties seem to lead back to a.) an

organizations failure to preserve a strong,well communicated, yet adaptable

vision,andb.) its inabilitytoconsistentlymaintain longtermgoalsandshorter

term strategies in supportof thatvision.As theJapaneseproverb states, The

failuretohaveastrongvisionwithoutactionisadaydreambutactionwithout

avisionisanightmare.lxxiv

5. Their Organization Has Failed To Implement Effective Short Term ActionsThat Are Aligned With Its Vision and Long Term Goals Once adramatic

change or significant instability has occurred in a companys world (and


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22

impact to itspeople requiresunderstandingof thedifferent rates atwhich

changecanoccurondifferentdimensions.(139)lxxvii

Oneofthefundamentaldifferencesthatchallengesuccessfulresponses(and

organizational change in general) is how seniormanagement and employees

viewsuchchange.Executivemanagement,inmanycases,tendtoapproachthe

action with optimism, decisiveness, and a sense of personal and corporate

opportunity,given the fact that this is the levelof theorganizationwhere the

change is being introduced and initially driven from. The rest of the

organizations

response

can

run

the

gamut

from

confusion

to

defiance,

from

anxiety to complete lackof commitment, fromdefensiveness toadvocacy,and

fromasenseofpersonalopportunitytoa fearof losingonesjob.In thearticle

Why Do Employees Resist Change, Paul Strebel states that, in order for

companiestobridgethisgapwiththeiremployees,theyneedtolookcarefullyat

theexisting compacts(whicharedefinedasmutualandreciprocalobligations

and commitments that define the employeremployee relationship and

determinetheresponsibilitiesofbothsidestoeachother)thatexistbetweenthe

companyandthemembersof itsworkforce.lxxviiiTheemployeesunderstanding

ofwhatisexpectedofthemandthedeterminationoftheirlevelofcommitment

totheirworkandtothecompanysvaluesallflowfromthiscompact.lxxixStrebel

suggeststhatunlessmanagementaltersthetermsofthesecompactstoreflectthe

postchange reciprocal expectations and obligations, and then persuades the

employees toaccept them, it isunrealistic formanagers toexpect theirbuyin

(and,ultimately,toexpectsuccessfulchange).lxxx


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23

Todays datadriven business world is characterized by many notable

systematicanddisciplinedapproachestoproblemsolving,includingSixSigma,

TQM,BPI,Kaizen,etc.Giventhis,onemightexpectthatwhenfacedwithradical

changeorsignificantissuesaffectingthebusiness,organizationswouldgatheras

muchrelevantdataaspossible inorder to fullyanalyze the situation.Another

expectationmightbe that theseorganizationswould involve thebestproblem

solvers and subjectmatter experts to determine the root cause(s), model (if

feasible) potential alternative or new approaches, and apply thebest possible

solutionorstrategy.Basedonpersonalexperienceandobservation,thisdoesnot

often

occur

in

practice.

In

their

recent

book

Hard

Facts,

Dangerous

Half

Truths,

andTotalNonsense:ProfitingfromEvidenceBasedManagement,JeffreyPfeffer

andRobertI.Suttonstate,

Businessdecisions,asmanyofourcolleaguesinbusinessandyourown

experience can attest, are frequentlybased on hope and fear,what others

seemtobedoing,whatseniorleadershavedoneandbelievehasworkedin

thepast,and theirdearlyheld ideologies in short,on lotsof thingsother

thanthefacts.(5)lxxxi

Perhaps a tangible example will help to illustrate the point. In a 2006

NBGH/WatsonWyatt surveyon employerhealth care costs, theorganizations

thatwereshown tobe thebestatmanaging therisingcostofemployeehealth

care

a.)

promoted

the

use

of

high

quality

providers

and

facilities,

b.)

used

data

and hard evidence to plan and implement health care programs, c.) actively

providedemployeeswithassistanceinbettermanagingtheirownhealth,andd.)

encouragedtheproperusageofmedicalservices.Thisviewdifferssignificantly


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24

from theclassiccorporateapproachofemploying the lowestcostproviderand

limitingthe(companyparticipating)optionsforemployees.lxxxii

In the book Less is More, author Jason Jennings argues that too many

companies neglect to ask themselves and answer one simple, yet critical,

questionbefore undertaking anymajor decision: What is the goodbusiness

reason for doing this?(106)lxxxiii Instead, Jennings says, decisions are usually

based on the short term pressing needs of themoment.lxxxiv In a quote from

NucorsPresidentandCEODanDiMicco(interviewedforLessisMore),astrong

insight

was

shared

When

you

examine

everything

and

make

decisions

based

onaskingifitsagoodbusinessreasonforthelongterminsteadofifitsgoodfor

theshortterm,theanswersyougetwillbeverydifferent.(110)lxxxv

Asmentionedearlier inPfefferandSuttons list,managementcanadoptan

approach,notbecauseof theassociated factsor theapplicationofsound logic,

butduetodeeplyheldbeliefsorprinciples,regardlessonwhetherthosebeliefs

areerroneousornot.lxxxviWhenpairedwith thepressureofcomingupwithan

solutionquicklydue to thegravityof the situationathand, similaritiescanbe

drawnwiththeconceptofthinslicingthatwassovividlydescribedinMalcolm

Gladwells bestselling book, Blink.lxxxvii Thinslicing is the ability of our

unconscious to find patterns in situations and behaviors using very limited

slicesofexperiencetocometoarapidconclusion.(23)lxxxviiiTheriskinherentto

Gladwellsconceptisapparent.Inmanycases,whenwearefacedwithacritical

situation and limited time to act, we oftenmakebetter decisionswith snap

judgmentsthanwedowithvolumesofanalysis(i.e.,achieforderingthefireman

out of aburningbuilding secondsbefore the floor collapsed).Unfortunately,


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26

theorganization(thehospital)toimprove.xcvFromtheirresults,theyconcluded

thatthehospitalstimesensitiveenvironmentandculturethatencouragedrapid,

independent resolution to problems caused frontline workers to rarely

participateintheprocessofremovingtherootcausesoftheproblem.xcviOnthe

rare occasions when the nurses did take a greater amount of personal

responsibilityandeffort forpermanentlyeliminating aparticularproblem, the

extra action was usually limited to communicating the problem to their

supervisor.xcviiTherefore,onlyasmallpercentageoftheproblemsencountered

were revealed to others within the organization, dramatically reducing the

potential

for

organizational

learning

and

improvement.(134)xcviii

Insomecases,developingwellanalyzedstrategicresponses thatare in line

withthecompanysvisionarenotattherootoftheproblem.Thetruesourceof

theproblem,infact,liesattheorganizationsabilitytoeffectivelyimplementor

executetheseresponses.InthearticleTheOrganizationvs.theStrategy:Solving

theAlignmentParadox,theauthorspointoutthattheinabilitytoappropriately

address the issues thatmany companies face isnotdue topoorly constructed

approaches,but is simply symptomaticofdeeply seatedproblems inherent in

theirorganizationalmodelsandtheirabilitytoeffectivelyrenderdecisionsand

execute action. They state that ...such problems are inherently difficult to

resolvebecausetheyarerootedintheeconomicsoforganizing,thecomplexityof

which hinders effective decision making.(7071)xcix By temporarily putting

strategic fixes aside in order to address the root causes of the constraining

problemsinherenttotheorganizationmodel,thesecompanieshavebeenableto

truly achieve alignmentbetween themselves, theirpeople, and their strategies

andareabletoexecutethesestrategieseffectively.c


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27

Inaddition to theorganizationalmodelsemployed, individual contributors

canalsocauseexecutionproblems.RamCharan,inExecution:TheDisciplineof

GettingThingsDone,statesthatputtingthewrongpeopleinplacetoexecute

a key part of abusinesss strategy (is) common, and that far toomany

leadersdontaskthemostbasicquestions:Whoarethepeoplewhoaregoingto

executethatstrategy?,andCantheydoit?.(143)ci

Ineffective communication and lack of feedback seem to also be prime

contributors

to

many

unsuccessful

efforts.

According

to

a

2002

survey

conducted

by the Society forHumanResourceManagement and the Balanced Scorecard

Collective, itwas found that, although 73% of the companies polledbelieved

they had a ...clearly articulated strategic direction, only 44% of the

organizationssaidthatthatstrategicdirectionwasadequatelycommunicatedto

the employeeswhomust implement it.ciiJohnKotter states Without credible

communication, and a lot of it, employees hearts and minds are never

captured.(9)ciii

Althoughhighlevelcommunicationsregardingtheefforts(andhowtheytie

totheorganizationsvision)willmostlikelycomefromthetopofthecompany,

themessagewilloftengetlostinthemassofcommunicationintheemployees

daytodaylives(Kotterestimatesanaveragecorporatetransformationprogram

represents less than 1% of total intercompany communications over three

months).(89)civ Paul Taffinder stresses that the high level message is very

important,butthekey(yetoftenunderused)communicationchannelthatshould

beutilized isthroughtheemployees immediatesupervisor.cvHe indicatesthat


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29

onthecutting,notonwhatthebusinessshouldlooklikefollowingthecuts.cxTo

borrow from oneof StevenCoveys 7Habits ofHighlyEffectivePeople, the

efforts fail tobeginwith the end inmind.cxiSlywotzky adds thatmost times

theseinitiativesmissthepointofmakingthecutsinthefirstplace,whichisntto

achieve efficiencies in areas that have limited impact to their customers,but,

more importantly, is to alter the business design in a way that matches

customer demands and is consistent with the new economic order in your

industry.(294)cxii

Thus

far,

we

have

looked

at

various

types

of

negative

results

that

can

occur

a.)when there isa limitedamountof time foranorganization torespond toa

dramatic change and there isgreatpressure to take swift action,b.)when the

organizationisunpreparedforexperiencingorexecutingactionsinresponseto

thatchange,c.)whenthereisalackofthorough,factdrivenanalysisbehindthe

decisionmakingassociatedwiththeactionstaken,d.)whentheactionstakenare

poorlycommunicatedorexecuted,ande.)whentheemployeesfailtogetbehind

theseactions.Imagineifalloftheaboveproblemswouldconvergeandplaguea

singlesolution.Asyoumightguess,theoddsforsuccesswouldbelimited,yetin

recentyears,companieshavetendedtoemploysolutionsthatfeatureallofthese

negative characteristics.Dramatic actions such as layoffs,majororganizational

restructuring,theclosingofoperations,outsourcingandconsolidationsareoften

employed as primary components of transformation plans in order to get

businesses back on track quickly and decisively, by rapidly achieving

operationalefficiencyandsignificantlyreducingcost.


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30

TheQuickFixPanacea:DownsizingandOutsourcing

From as far back as the late 1970s, companies have been continuously

utilizing the strategy of downsizing in order to increase an organizations

overallperformance.Yetithasbeendemonstratedthatmoreoftenthannot,the

intended impact of this action (lower costs, enhanced productivity, increased

organizationalnimbleness,andincreasedprofitability)fallssignificantlyshortof

themark.Inadditiontofailingtomeettheintendedobjectives,companieshave

experiencedunintendednegativeoutcomesrelatednotonlytotangiblefinancial

matters, but less tangible organizational and workforce costs, as well.

Organizational

restructuring

has

become

a

primary

driver

of

worker

insecurity

regarding theirjobscxiii,andasJasonJenningspointsout,jobcutsusuallycause

organizationsmoreproblemsthantheyultimatelysolve.cxivHeaddsthatCasual

layoffs, which may have the seemingly happy side effect of momentarily

nudgingupthestockprice,areinfactabsolutelycounterproductiveinthelong

term.(82)cxvAccording toPfeffer andSutton, There isno solid evidence that

using layoffs rather than less draconian methods to cut costs increases

performance.(161)cxvi

InAugustof2006,justasanewroundoflayoffswereexpectedtotakeplace

atFordinordertoaccelerateitsongoingrestructuringplan,thefollowingquote

byananonymousemployeewaspublished intheDetroitNews:Itjustmakes

everyone think thatFordmanagementhasnoplan.Theyarejustwinging itas

eachcrisishits.Itsaneverendingdiscussionofwhatcangowrongnext,usually

followedbyadiscussionofhowclosepeoplearetoretiring.(1,14)cxvii


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31

Theoftreferenced 20002001Bain&Company studyof layoffs at S&P 500

companiesuncovered anumberof surprising facts regardingdownsizing.The

report uncovered that companies that used significant layoffs (10% of their

workforce or greater) as a costcutting tool sawWall Street respondwith an

overalllowerstockprice,andexperiencedanextendedpaybackperiod(over18

monthsinsomecases)whichcausedthesecompaniestobeoutofsynchwiththe

averagelengthofeconomyturns.cxviii

In the book, Grow to Be Great: Breaking the Downsizing Cycle, authors

Dwight

Gertz

and

Joao

Baptisto

suggest

that

companies

must

move

beyond

the

currentwaveofdownsizing,restructuring,andreengineeringandmustturnto

growth to be truly successful.cxix The authors present three fundamental

foundations for growth that every company must provide in order to be

successful:competitivelysuperiorcustomervalue,superioreconomicsacrossthe

entirevaluechain,andexcellence in strategyexecution throughorganizational

alignment.(127)cxxGertz and Baptisto proceed tomake a case for the fact that

tools such as acquisitions anddownsizingprovideonly short termbenefits at

best.(13)cxxi They suggest that organizations seeking long term growth should

lookpastacquisitionsandontocreatingbusinessstrategiesaimedatsatisfying

their customersandmovingaheadof theircompetition.(36)cxxiiTheypoint toa

studyconductedin1994byTheWyattCompanythatshowedthatonlyathirdof

the companies surveyed experienced an increase in productivity after

downsizingactivities.(19)cxxiiiInanotherstudyreferenced,conducted in1993by

theAMA, 80% of surveyeddownsized companies experienced adownturn in

morale and only 45% of the companies surveyed recognized an increase in

operatingprofits.(12)cxxiv


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32

A 1999 AMA Annual Workforce Survey revealed that 36% of the

participatingfirmsbothcreatednewjobsandcutexistingjobsduringthesame

period.cxxv In the same survey, 70% of the companies cuttingjobs did so for

reasonsthatwerenotrelatedtocurrentoranticipatedmarketdemand,butwere

primarily done for reasons given such as corporate restructuring and

reengineering processes.cxxvi According to Peter Cappelli, in many cases

employersgainrequirednewskillsbychurning(thelayingoffofworkerswith

obsoleteskillsandreplacingthemwithworkersofferingnewerskills)versusthe

longer

term

(and

more

socially

responsible)

approach

of

retraining

their

existing

workers.cxxviiGiven the current estimates of a replacement cost that can range

from150300%ofthedepartingemployeesannualcompensation(dependingon

thelevelofresponsibilityandtheestimator),onecouldseehow,withoutcareful

analysis,thesestrategiescouldeasilybringunintendednegativeresults.cxxviii

Although the theory of perpetual organizational growth as a solution for

continuedcorporatesuccesshasbeenchallengedbysome,onepointthatauthors

onthesubjectseemtouniversallyagreeonisthat,ifdownsizingisemployedby

acompany,itmustbedonewithmuchplanningandperformedwiththeutmost

care. In TheHeadcount Solution:How toCutCompensationCosts andKeep

YourBestPeople,authorsFredericCrandallandMarcWallaceemphasize that

byutilizingdownsizing inaquickandhaphazardmanner, the company faces

the risk that thewrong people couldbe let go as a result, that is, thosewho

possess the ...significant proprietary intellectual capital and experience that

willberequiredbythecompanytomakeitthroughthecriticalperiod.(6)cxxixIn

hisarticle,TheHighCostof Dumbsizing,DavidEstokaddstothispointby


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33

statingthatduetothecommontwowaveapproachofofferingearlyretirement

packages first followed by across the board percentage headcount cuts,

companieslostsomeoftheirmostcriticalemployees.cxxxHeutilizesaquotefrom

DwightGertztosummarize:Youlosetheolderpeoplewhohadexperienceand

youlosetheyoungerpeoplewhohavetheenergy.(2)cxxxiSusanR.Fisherand

MargaretA.White,intheirpaperDownsizinginaLearningOrganization:Are

There Hidden Costs? assert that downsizing, or any restructuring that

involvesbroadbasedpersonnelreductionormovement,mayseriouslydamage

thelearningcapacityoforganizations.(249)cxxxiiCrandallandWallacealsostress

that

downsizing

activity

should

only

be

taken

as

a

last

resort

and

after

substantial planning has been performed, alternative strategies have been

attempted and a formal human capital needs assessment is performed.cxxxiii

SolomonBediako, inThe ImpactofDownsizingonEmployeesofCommunity

Healthcare Service Organizations, suggests that the key to ensuring a

successfuldownsizing...lies inanorganizationsabilitytomanagetheprocess

of downsizing effectively, and give very careful consideration to the human

dimension.(6)cxxxiv In support of this thinking, Rigby (in the Bain study)cxxxv,

Pfeffer and Suttoncxxxvi, and Samuel Greengard in his article Dont Rush

Downsizing:Plan,Plan,Plancxxxviiallrecommendperformingindepthanalyses

questioning thegoalsof theaction,anddeveloping/implementinga structured

approachbeforeundertakinga significantchange initiative likedownsizing, in

ordertoavoidnegativeresults.

An example of the importance of thorough planning and careful

implementation: according to an articlepublished in lateMarchof 2006,G.M.

haddecidedtocontinueitsnewhirenetworkingprogramandwasconsidering


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34

expandingitsnewhireacceleratedindoctrinationinitiativeJumpStart,despite

itsannouncedeliminationof30,000manufacturingjobs intheU.S.andCanada

by 2008.cxxxviii This type of mixedmessage could potentially undermine

employeemorale,trust,andcommitment,byitsinformaldisseminationthrough

employeessocialnetworks.

Asafinalpointregardingtheimportanceofgoodplanningandanalysisprior

todecisioning,AssaBirati andAharonTziner suggested in their article that a

formalcostbenefitanalysisbeperformed,andthedecisiononwhetherornotto

proceed

with

a

downsizing

plan

will

then

depend

on

its

comparative

quantitative and nonquantitative merits to other alternatives.cxxxix Location

closures,employeeseverance,consolidationsandotherassociatedrestructuring

actions have significant costs associatedwith them, andmany are not easily

identified or quickly quantified.As an example,just the cost of changing an

entire locations formsand stationary to reflectanewaddresscan introducea

significantamountofcosttoaproject.

Even those in support of downsizing as an effective tool, criticize the

approach thatmost companies take in its implementation. In the article Best

Practices inWhiteCollarDownsizing:ManagingContradictions,authorsKim

Cameron,SarahFreeman,andAneilMishraarguethat,althoughdownsizingis

andwillcontinue tobeanecessary tool,manyof theobservedeffortssuffered

from ineffective execution.cxl They engaged in downsizing activities that

fostered dysfunctional outcomes (e.g. decreasing morale and commitment,

increasing conflictand criticism), rather than improvedperformance.(7172)cxli

The authors put the blame for most of this dysfunction on the observed


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35

companiesattempts toapplyacongruent (onesize fitsall)ornonprioritized

approach to the implementation, versus a bifurcated and seemingly

contradictory strategy of applying both well planned and carefully

communicatedlongtermandshorttermapproachessimultaneously.cxliiInThe

Role of Mutual Trust in Effective Downsizing Strategies, Aneil and Karen

Mishrapointout thatcompanies thatutilizeheadcountreductionas theirchief

cost reduction strategy should rethink this position given the negative

correlation between pure workforce reduction and organizational

performance.cxliiiTheysuggest thatcompanies that includejobreductionasone

component

of

a

much

larger

systemic

change

strategy

of

organizational

redesign

(e.g.,theredesignofjobs,tasks,functions)faremuchbetter.cxliv

When a company undertakes a large scale restructuring or downsizing

project, it often fails to take into account the more intangible (but critically

important)costsassociatedwiththeaction.Reductionincustomerservicelevels

and retention, damage to corporate reputation (as viewedby the public and

potentialnewemployees),andmostprofoundly,thevariousnegativeeffectson

theemployees thatstaywith thecompany following theaction,canallhavea

detrimentalimpactonanorganizationsperformancemovingforward.

Ifthetruerootcauseofproblemsfacingtheorganizationisculturalinnature

and requires wholesale changes in behaviors and skills, the

unlearning/relearningprocesscanbearduousandtimeconsuming.PaulStrebel

pointsoutthatmanycompaniesutilizethemethodofpeoplereplacementasa

rapid and easy alternative to retraining, without full consideration of the

consequences.cxlvHestatesthattheactofreplacing(ormorelikely,eliminating)a


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36

significantnumberofpeoplecertainlyrepresentsaswiftactiontowardsgaining

the newly required skills,but it is potentially at the expense of losingmany

desirable skills and talents within the organization that are still vital and

required.cxlvi

Customer acquisition, retention, and loyalty are also shown tobe strongly

correlatedwith employee commitment and retention. InFrederickReichhelds

book, The Loyalty Effect, he points out in his analysis that long term,more

experienced employees are not only better at finding and acquiring new

customers

for

the

company

and

creating

strong

customer

loyalty,

but

they

can

be

amajor sourceofboth customerandnew employee referrals.cxlvii In thearticle

WhyDeepLayoffsHurtLongTermRecovery,one telecom company found

themselves cutting too deeply in a required technical area.cxlviii This not only

resultedinthelossofcustomerconfidenceduetoserviceissues,butitultimately

requiredthehiringofadditionalnewworkerstohelpbringservice levelsback

up.cxlix Inadditionto lostcustomerreferralsandrehiringcosts,there isalsothe

potentialcostof lostbusinessopportunities sacrificed inorder to recover from

unacceptableservicelevelsandtosearchforlosttalent.cl

Restructuring efforts that are handled poorly can have clearly destructive

effectsoncorporatereputation.Ifyouperusetheinternetforinterviewingtips

andperformasearchonsuggestedquestionstoaskinyourinterview,youwill

beremisstofindasitethatdoesnothighlightthequestionHasyourcompany

experienced a layofforheadcount reduction in thepast twoyears? Itwould

appearthatmostworkerswanttojoinacompanythatofferssomebaselinelevel

ofstability,evenifitissimplylongenoughfortheemployeetoexecutehis/her


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38

seem lessworthy of respect aspotential employers, asbusinessneighbors,

and,perhapsmostsignificant,asinvestmentopportunities.(205206)clv

Manycompanies

who

undertake

radical

restructuring

fail

toplace

the

proper

importance on honest and frequent communication. Mishra, Spreitzer and

Mishra go into great detail on the importance of trust and effective

communication to the success of a downsizing effort, particularly during the

implementationphase,inordertocarefully...avoiddecimatingwhatevertrust

and empowerment it has so far preserved during the process.(92)clvi For

example, ina2001Anderson/KSRsurveyof layoff survivors,nearlyhalf said

that they found out about the cutsby word ofmouth.clviiDavidM.Noer, in

Healing theWounds:Overcoming theTraumaofLayoffs andRevitalizing the

Downsized Organization, points out that ...authenticity, congruency and

empathetic communications are key interventions in dealingwith employees

who remain after the layoff, but that managers have a natural tendency to

controlanddeny.clviiiNoersuggeststhat,inordertobeeffective,managersneed

toresist these tendenciesandexhibit...thecourage toengage instraight talk

withthoseimpacted.(117)clix

Many times, the information that tends tobe undercommunicated is the

detailed rationalization behind the actions being taken and the specific

expectationsifasuccessfulimplementationoccurs.BaronandKreps,inStrategic

HumanResources:Frameworks forGeneralManagers,point to the importance

ofextensively(andhonestly)communicatingthedetailsoftherestructuringand

providingallkeydetails, including thejustification for theactions tobe taken

throughout the entire process, from the planning stage through post


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summarizes that top management in organizations need to stop portraying

layoffs as some kind ofbrilliantmanagement decision and instead accept

responsibilityforwhatever itwas that,undertheirwatch,producedconditions

sodisastrousastonecessitatemassfirings.(215216)clxxii

The impact of a downsizing or restructuring on retained or survivor

employees canbe significant and is often forgotten.According to Pfeffer and

Sutton,thereissignificantevidencethatlayoffscausedamagetotheemployees

thatremainaswellasthosethatare laidoff.clxxiiiCommentingon theresultsof

the

2001

aforementioned

Anderson/KSR

survey,

Michael

Lyman

of

Anderson

warned of the danger of disaffecting surviving employees due to poor

organizational communication during the process.clxxiv He states that,

Companiesareremissiftheydontkeeptheneedsofemployeesattheforefront

duringsuchadisruptiveculturalchange.clxxvThissurveyisevidencethatmany

companies have not done enough to minimize the emotional damage for

employeeswhoareretainedduringrestructuring.(31)clxxvi

The negative result of not paying specific attention to the surviving

employeespostrestructuring levelof engagement canbepredictable. In The

EffectsofDownsizingonSurvivors:AMetaAnalysis,GladysB.Westswork

focused on the impact of downsizing activity on surviving employees and

confirmed, in the course of her study, a strong positive correlationbetween

layoffsurvivorscommitmenttotheorganization(theirloyaltyandmorale)and

their satisfaction with the job. In addition, she confirmed strong negative

correlations between the survivors intention to leave the company and the

followingthreevariables:a.)theirsatisfactionwiththejob,b.)theircommitment


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to the organization, and c.) how psychologically attached they are in the

performanceoftheirjob.clxxviiDavidM.Noeraddsthatsurvivorsymptomsdo

not automatically go away on their own. They remain, evolve, and often

intensifyovertime.(83)clxxviiiReichheldaddsthatcompanieswholayoffworkers

when times arebaddemonstrate to the survivors that the company cannotbe

dependedontobeloyaltotheminfutureperiodsoftrouble.clxxixGiventhatloyal

and engaged employees are a necessity in pulling an organization through a

periodofadversity,acompanycanalmostguaranteethatthenexttimeitsin

trouble, itsmost talented employeeswilljump shipjustwhen theyreneeded

most.(96)clxxx

In fact, in the article Downsizing Outcomes: Better a Victim Than a

Survivor?,theauthorsstudyindicatedthatemployeesdisplacedasaresultof

downsizing who secure new employment actually fare better than the

survivors, due to a greater sense of empowerment (control), less stress, and

fewernegativejobstrains.clxxxi

Among themost important of these negative survivor symptoms are the

erosionofsurvivingemployeestrustinthecompanyanditsmanagementanda

lost senseof empowerment.AneilMishra andGretchenSpreitzer suggest that

the amount of trust in theirmanagement heldby the downsizing survivors

significantly reduces their view of the effort as a threat.clxxxiiThey state that if

remainingemployeesdonothavetrust,theywillmostlikelystarttobelievethat

management is putting its own needs ahead of the organizations and the

employees.clxxxiii They also suggest that this lost sense of empowerment by

survivors may be due to a tenuous sense of job security following the


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43

downsizing event and alsobymanagements taking amore active and direct

controloverthedownsizingprocessitself.clxxxivInalaterarticle,thesameauthors

research determined that those employees who feel more attached to the

organization (as demonstratedby a strong feeling of trust inmanagement, a

feelingthatthedownsizingprocesswasfaironanumberoflevels,andbytheir

perceivedlevelofempowerment)aremorelikelytoremainwiththecompanyin

the year following the downsizing.clxxxv In a study looking at government

workers aged 45 and older that had survived a major downsizing, non

management workers, in particular, reported a significant decrease in

commitment

to

the

organization

20

months

later.clxxxvi

Finally,ifonewastofeelthatresiliencyofemployeessufferingorsurviving

layoffsisattainedthroughexperience,thestudyRepeatedDownsizingContact:

TheEffectofSimilarandDissimilarLayoffExperiencesonWorkandWellBeing

Outcomes found evidence that repeated number of exposures to direct or

indirect layoffs resulted inhigher levelsofnegativework attitudesandhealth

problems in thoseemployees.clxxxvii Inaddition, the study foundnoevidence to

supportthatemployeeseventuallygrowaccustomedtolayoffsoveranumberof

occurrencesorthatthere isapositiverelationshipbetweenemployeeresiliency

and exposure to headcount reductions.clxxxviii Jeffrey Pfeffer, in his book The

HumanEquation,adds that,althoughanorganizationmightbeable to restore

employeecommitment followingasingle,wellexecuteddownsizing,engaging

inmultipledownsizingeventsmaketheimplementationofhighcommitment

workpracticesalmostimpossible(187)clxxxix


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44

A significant missed opportunity, particularly if the restructuring is well

plannedandtiedtoacompanysvisionandgoals,istonothaveanadequatetool

inplacetomonitortheprogressandsuccessoftheaction.Onewouldthinkthat

this would be a straightforward way to build survivor trust and employee

enthusiasm and support; to actually envision progress being made and the

company getting closer to its goal. Instead themonitoring of progress or the

validationofsuccessoftenseems tobedownplayedor, insomecases,avoided

completely. It is understandable that this should occur in poorly planned or

misguidedefforts,asmostcompaniesdonotwant topromoteanunsuccessful

strategy.

It

is

less

clear

why

some

companies

do

not

make

the

effort

to

report

this

informationback to the employees,but instead leave the social network to

evaluateitssuccessorfailurewithoutfacts.

In line with Michael Porters aforementioned view of operational

effectivenesscxcdrivingcompanies tocompetitiveconvergence, thecurrenthigh

levelofoverseasoutsourcingtoIndiaandAsiacanalsobeviewedinasimilarly

criticallight.Theseactionshaveobviousshorttermcostbenefitsforcompanies,

but as competitive demand grows in the long term,wages in thesemarkets

shouldriseandmakethecostbenefitequationlessclearcut.Whencoupledwith

thecomplexitiesofmanagingoverseaslabor(managementcontrol,serviceissues

related to culturalmisunderstandings, etc.) and issues related toworking in

countries where the outsourced business isbeing performed (infrastructural,

cultural, and political, etc.), the economics become much less obvious.cxci

According to the 2006 Saratoga/PWCAnnual Key Trends inHuman Capital

report,theabilitytorecruitandretain offshoredworkers isalreadybecoming

moredifficultdue togreatercompetition for talent (demandoutpacingsupply,


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45

in the short term at least) and risingwage levels.cxcii In a recent news article,

AppleComputer shelved itsplans toopen a large technical support center in

Bangalore,withapotential for3,000workershiredby2007.cxciii In thearticle,a

sourcewhowas familiarwith theplans stated that thedecisionnot toput the

centerinIndiawascostdriven,andisquotedassaying,...theturnoverishigh,

thecompetition forgoodpeople is strongand thecompany feels it...cando

[suchwork]moreefficientlyelsewhere.(48)cxciv

The 2006 Saratoga/PWC study also states that companies decisions to

outsource

overseas

(or

to

outsource

in

general)

that

are

motivated

purely

by

cost

reduction are providing less than satisfactory results due primarily to not

adequatelyaddressinghumancapitalissues.cxcvAnotherriskisthat,intherush

tocutcostthroughforeignoutsourcing(andoutsourcingingeneral),companies

can, over time, find themselves increasingly more and more dependent on

suppliers.Inthebook,CompetingfortheFuture,authorsGaryHamelandC.K.

Prahalad argue that companies that utilize outsourcing of any kind should

clearly understand what skills are deemed ...critical to competitive

differentiationandgrowthandensurethattheyarenotunintentionallylostto

outsourcingsuppliers.(219)cxcvi

The Saratoga/PWC study also reveals that companies are ...increasingly

shiftinghighervalueaddedactivitiesrequiringspecificknowledgeorwhere [a

companyhas]skillshortagesto[offshored]supplierswiththerequisiteresources

andexperience.(16)cxcviiInthearticleWheretheKnowledgeWorkersAre,Fay

Hansenbacksupthispoint,statingthatU.S.companiesaremovingR&Dwork

atall levels tooutsourcedsuppliers inAsiaandEasternEuropewhere there is


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48

the most critical cause is covered; the inability to fully leverage a dedicated and

engagedworkforcetoexecutetheseactions.

6. TheOrganizationHasFailedtoHaveanEngagedWorkforceInPlaceDuringPeriodsofInstabilityInaJanuary2006articletitledWorkersattheWheel

theJohnHollonstates,

If Ford is to be successful in reversing the downward trends and

growinglosses in itsNorthAmericanoperations, itmustgetthecompanys

most critical asset itspeople fully engaged.Thats no small taskwhen

managementjustannouncedthatitiscuttingasmanyas30,000workersand

closing14plantsandotherfacilities.(2)ccvi

Amore recentarticle fromAugustof2006, titledTrickleDownDespairat

Ford, points out that, although the companys current financial andmarket

relatedproblemsarewellknownbythepublic,...whatoutsiderscantdetectis

the depth of employee despair,much ofwhich stems from internal problems

suchasmanagerialchurnandconstantstrategychanges.(3)ccvii

Companies cannot hope to have an engaged workforce in place during

periods of instability and significant change if they do not already possess a

dedicatedandengagedworkforcepriortothediscontinuity.Whenutilizingthe

word engaged,Dychtwald, Erickson, andMorison emphasize that theword

satisfiedcannotbeusedinitsplace,althoughthetwotermsarerelated.ccviiiThey

pointoutthatwhereasasatisfiedemployeeviewsthejobassufficienttomeet


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his/hercurrentneeds,an engagedemployeeviewshis/herjobwithasenseof

passionandcommitment.ccix

In order to fully explore the hypothetical reasons why an engaged

workforce isnot commonly found inmanyorganizations today, a closer look

mustbe taken at the primary indicator of the problem: the evolving loss of

loyalty that companies are experiencing from their employees. From there, a

furtherbreakdownofsixsignificantrootcauseswillbeproposedanddiscussed

in greater detail. These organizational shortcomings are: a.) the failure to

recognize

the

importance

of

employee

retention,

b.)

the

failure

to

pay

proper

attention to true employee needs and requirements, c.) the failure to provide

opportunitiesforgrowththroughcontinuouslearninganddevelopment,d.)the

permittingoftheproliferationofdumbjobs,e.)thefailuretovigilantlynurture

a corporate culture that supports employeemotivation, and f.) the placing of

limitationsonanemployeesa

hciwhitepaper.pdf

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