Unless you are comfortably numb and disengaged at work (in which case stop reading right now), you always feel that work should be done safer, simpler, better, faster, cheaper. Likewise, you wish that your leadership style and that of your colleagues would be more inspiring or less toxic. What about a dream team collaborating in a state of flow to create value?
Your workplace always needs transformation, integrated transformation, ongoing integrated transformation.
What Business Transformation?
We keep on sticking the words business and transformation together. Transformation is more than a mere change. It is a marked change in form, nature, or appearance says the dictionary. So it is a process of changing the organisation from one state to a more successful one. Let’s look at two models to help us understand business transformation.
Perpetual Youth and the Corporate Life Cycle
Do you remember your childhood, being a teenager, young adulthood, and maybe the next stages of your life? Sometimes the change of season was very brisk, sometimes imperceptible, but by comparison, you could experience a marked change in your world view, behaviour, decision-making process, physical abilities, relationships, aspirations, etc.
With the Corporate Life Cycle (Fig. 1), Dr Adizes shows that organisations also transform through different stages, from growth to decline, courtship to death. During each stage, the organisation faces different types of problems and require specific leadership styles.
There is however a critical difference between an organisation and a living organism: the organisation is not doomed to die but aims at reaching its Prime stage of perpetual youth and sustaining it – a balance between entrepreneurial agility and process stability, flexibility and control (note that there are other models of organisational life cycle).
In our Operational Excellence workshops, we like to illustrate the point by showing that the life cycle is like a wave that surfers attempt to catch. It takes much sweat and effort to catch it, and some never do, but once you catch it, it takes agility and control to stay on it, lest you lose it. It’s dynamic and never stops. It’s righteous, dude. This is the Prime stage of your organisation. If you fall off the wave, the organisation is declining. It will take more effort to catch the next wave. If your organisation doesn’t, it will slowly drown, in the middle of the red ocean. Alone. Hopefully, you would have jumped surfboard before it happens.
So, business transformation is the journey of getting to Prime from the growth stages or to go back to Prime from the decline stages… and stay there, in ever unstable equilibrium between agility and control, creativity and discipline.
What do the leadership styles, and systems look like in Prime? Let’s look at another model first.
Discipline or Creativity? The Enabling Bureaucracy
Earlier, this century, when I had just contracted the Lean virus, I was haggling all the time with a colleague, the Ops director, on the necessity for improving the processes when he was arguing that we had to “go back to basics”. It seemed to me that there was a management continuum linking the disciplinarians to the laid back libertarians. The needle would tilt to one side or the other based on the financial results.
Then, I read Jeffrey Liker’s Toyota Way. I stumbled upon the concept of Coercive vs Enabling Bureaucracies and his reference to a paper by Paul Adler. Only then did I start to understand that we needed both discipline, extensive rules and structure, on one hand, to enable the release of the creativity required to improve people, product and processes, on the other hand. In short, one can only improve a system if there is a benchmark created by the standards: you can only break the rules if you know the rules!
Dr Adler shows how to distinguish organisations across two dimensions, the technical structure of rules, procedures and controls or lack thereof and the social structure which is either coercive or enabling (Fig. 2).
I like these stereotypes to illustrate the extreme of the four organisational types:
- Autocratic: dictatorship under Idi Amin: you curry favour with the boss, but since there are hardly any rules and that he has several psychological impairments, you eventually end up bullied, banished or beheaded.
- Coercive Bureaucracy: traditional armed forces: you’re not here to think but to follow procedures and orders. You’re a machine.
- Organic: Young professionals starting up a venture to develop the next mousetrap app. Enthusiastic, self-driven, scattered and ill-disciplined. You’re cool though.
- Enabling bureaucracy: servant leadership exercising tough love, disciplined and empowered employees, continually improving processes and delighted customers. You can’t wait for Monday mornings.
Barbara Lawton, one of the last interns of Edwards Deming, calls this state the Transcendent Organisation. At Toyota, this comes naturally and they just believe they are on the journey. They are pursuing operational excellence.
Business Transformation in the Quest for Operational Excellence
Now, as I attempt to summarise what the state of transcendence is in the organisation in its Prime Stage, I ask for the benign consideration of all the followers of Peter Drucker, Edwards Deming, Taiichi Ohno and Izaak Adizes.
In an organisation in search of operational excellence, a visionary leadership nurture their people to continually improve processes and products to create customers and develop their loyalty. Teams of employees are empowered to experiment with new thinking under the coaching of servant leaders to make the work safer, simpler, better, faster, cheaper.
What Needs to Be Transformed First? Leaders.
What does it take to change the culture? There is first a burning desire from leadership to transform the organisation (or a great level of dissatisfaction with its current state), they are developing a vision of Operational Excellence and the first steps of a plan to start the journey. Fortunately, we have examples of what looks good and the principles have been well explained since the middle of the last century.
Stephen Covey writes that if you want to change the system, you must first change the system’s programmers.
Change is individual and leadership needs to change first.
Tracey Richardson in the Toyota Engagement Equation opposes:
- Traditional managers who work in offices and only interact with their people to deal with a crisis, announce targets, reinforce rules and policies, or assign blame when things go wrong, with:
- Servant leaders who develop and support their people in a learning environment.
Where would you plot yourself on this journey from traditional management to servant leadership?
Transformation is a cultural revolution that happens in evolutionary incremental steps supported by leadership routines. Leaders need to develop healthy habits to start transforming.
Dr Lawton puts it this way: business transformation moves the entire paradigm of the organisation belief system of what it means to be successful (culture change).
Practically, based on our current learnings, and it may seem trivial to some, we recommend four routines to support real leadership transformation and culture change in mid-size organisations:
- Establish or reinforce a structure and routines of accountability where leaders learn to run regular and effective standardised meetings. We always start at the executive level. You have probably experienced that the most disruptive force in an organisation is executives that force everyone else to play havoc with their diaries due to their inability to follow disciplined routines. Great leaders have first developed self-leadership, which starts with self-discipline. Whenever we see a sloppy culture, there are sloppy leaders.
- Create coaching routines for top leadership. When the organisation establishes a structure for improvement, be it based on the coaching practice of the Toyota Kata or project sponsoring a la Six-Sigma, leaders engage with the people and the process. They develop a profound knowledge of processes, variation, wasteful activities, cycles of learning (PDCA), relationships, dependencies, etc. They get to see reality deeply and understand it.
- Engage in executive mentoring. At the competitive level, all winning teams (rugby, football,…) or individuals (tennis, natation,…) have coaches. Coaching provides expertise, feedback and accountability to bring out the best from the coachees. They facilitate the development of physical and mental capability, tactical and strategic flair.
Similarly, wouldn’t you think that as your organisations operate in a competitive environment, leadership in general, and executives in particular, shouldn’t benefit from the external support of a mentor? And the definition we use of mentoring is that of the process of facilitating and equipping others in order to reach their innate potential.
- Establish an annual routine of Long-Range Planning. Who are we? Where are we? Where do we want to go? How do we get there i.e. what is the path described by actionable breakthrough objectives? The contribution of senior and middle management to the long-range planning led by executives rally them to the transformation process. The direction thus provided help them overcome the sense of loss of control brought about by the change.
Now that top leadership engages more deeply with people and processes, what happens next? The simultaneous change of both the management system and individuals.
Integrated Ongoing Transformation
Many are the giants that have preceded us who have described the modern corporation as a complex system wherein sustained improvements can only happen when applied in all aspects of the organisation, incrementally, every day.
Fujio Cho, the first president of Toyota in the US, says it better: “Many good American companies have respect for individuals, and practice Kaizen (±continuous improvement) and other TPS (Toyota Production System) tools. But what is important is having all of the elements together as a system. It must be practised every day in a very consistent manner–not in spurts–in a concrete way on the shop floor.”
In her presentation on Leading the Transformation Process, Barbara Lawton elaborates on Dr Deming System of Profound Knowledge. A transformed style of management drives the change in two dimensions simultaneously, the individuals and the management system, through incremental iterative changes, towards an aim (Fig. 3). Progress and aim are regularly evaluated and adjusted.
For individuals, part of the discomfort of change comes from the sense of loss of control when their expectation about the future is disrupted; when they are unable to dictate the outcome or be able to anticipate the outcome. The organisation must be able to nurture individual self-esteem and reduce the discomfort to change.
For the organisation, if individuals are eager to change, the organisation must be in a position to capture and act on the knowledge gained. Dr Lawton uses the analogy: transformation is like renovating a house while living in it. As we change something e.g. remuneration system, we need to understand how it is going to impact other aspects of the operation.
Components of the system (such as processes) and people are interrelated. A change in one dimension affects the other. It happens all the time. It needs to be managed as the overall system evolves.
She provides two examples of the negative impact of attempted change in one dimension in isolation of the other:
- The organisation recognises that people need to be engaged first before implementing change. As employees are being sent to workshops or outdoor team-building experience, they come back on a high, pumped up. They feel great. Back at work they start changing their behaviour and end up as misfits since the organisation hasn’t changed and develops antibodies. So the organisation invests in people and harvests bitter cynics that either become even more resistant to future change or leave the organisation.
- The organisation that has three different product lines in three different market segments engages in restructuring from a functional structure to a business process structure with the view of improving teamwork and efficiency. After 18 months the performance hasn’t improved and people have reintegrated the old structure. There was no adequate communication and a lack of on-going management of change.
Examples of necessary integrated transformation
- Imagine that you engage in the improvement of a production line. You develop mini-business units to communicate and solve problems, reorganise the line, reduce work in progress and inventory but the upstream department is still delivering based on planning and long runs and not on the requirements of the improved downstream line. Too much inventory of what is not needed now is available and not enough of what is required. The overall performance is not improving. Most of the improvement effort is wasted. People get demoralised.
- Pushed by one of its customers, an organisation decides to embark in the process of certifying its business management system under ISO 9001. Top leadership doesn’t understand that it is an opportunity to transform the organisation into a more profitable version of itself, through the increase of clarity and control of processes and reduction of risk to the business. Quality Assurance carries the can, the Accounts department the cost. Management of change is aimed at ensuring compliance, not transformation. Middle management is miffed. Quality is seen as a cost. The Quality management system is imposed on people and not integrated into the fabric of the organisation.
- A system of Continuous Improvement is developed by the CI department. Industrial engineers are deployed. Improvement Projects are identified and run. Outcomes are somewhat a success. Standards are created, but they are not properly integrated into the existing management system. Controls or KPIs are not in place. There is a lack of continuity for training. The personnel responsible for the improvement retires, is promoted or another manager takes over the department. Six months later, the new standards have been compromised. Performance goes back to historical levels.
- The Continuous Improvement department develops registers on spreadsheets for problem-solving, innovation and improvement projects. These are island systems which are often alien to the Quality Management System. They don’t communicate to the management of nonconformities, risk or documentation. It is almost impossible to have an integrated view of the health of the various processes. performance analysis is ad hoc and time-consuming.
At the end of this post, what are our lessons learnt?
Business transformation is the journey of transforming the organisation culture, characterised by a different management style and a definition of what business success is. Transformation is first led by transforming leaders who are able to engage in iterative steps with people who continually learn to improve their processes. Un-coordinated and isolated attempts to either improve people engagement or process performance is unlikely to have great and lasting results.
The signs of the culture change are satisfied and loyal customers and joy in the workplace.
- Prime Stage in Dr Adizes Corporate Life Cycle – article and video on the site of the Adizes Institute Worldwide
- Organisational Life Cycles– Wikipedia article
- The Toyota Way– Wikipedia article on Jeffrey Liker’s book
- Building Better Bureaucracies– Paul Adler’s article
- Leading The Transformation Process– Deming Institute article by John Hunter and video of Barbara Lawton’s presentation at the 1993 Ohio Quality and Productivity Forum conference
- How to Become Excellent – video of impi! understanding of Operational Excellence
- The Toyota Engagement Equation– book by Tracey and Ernie Richardson on Amazon
- Toyota Kata– Wikipedia article on Mike Rother’s book
- Six-Sigma– Wikipedia article
- ISO 9001 – Wikipedia article