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Why good companies go bad

Why good companies go bad When business conditions change, the most successful companies are often the slowest to adapt. (Donald N. Sull 1999). Session 7 Managing Organizational Change: Strategies Revisited. Topics for Today. Reflections on EIS simulation Strategies for change

joelle-miller
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Why good companies go bad

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  1. Why good companies go bad When business conditions change, the most successful companies are often the slowest to adapt. (Donald N. Sull 1999)

  2. Session 7Managing Organizational Change: Strategies Revisited

  3. Topics for Today • Reflections on EIS simulation • Strategies for change • The implementation process • Balanced scoreboard • Why good companies go bad? • Structural inertia • Growth and strategic changes • Conclusions

  4. The implementation process • A series of issues: • Top-down vs. bottom-up • Cultural vs. structural • Intrinsic vs. extrinsic motivation • A systematic change program • The importance of implementation

  5. Problems in implementation • Examples • The Smithers example • Police in New York state • Why? • Interests and interpretation • Past experience and interpretation • Competition for attention • Multiple pulling/pushing forces in different directions • Implementation as a continuation of decision making

  6. Balanced scorecard • What is balanced scorecard • Beyond single measure • Generate balanced attention to important aspects • Video • But the experience at a large consumer bank…

  7. Balanced Scorecard at a large consumer bank • The context • The CEO’s intension • The implementation: HRM – regional office – branches • The academic conference • Problems in implementation • Complex system of multiple indicators • Implementation through bureaucracies • Subjective versus objective measures • Lessons –

  8. Implementation with results(Schaffer and Thomson 2000) • Why results-driven, not activity centered? • Keep the eyes on the ball • Discourage symbolic compliance • Push out of the comfort zone • Establish early wins • Provide clear goals and mobilize resources to carry out the change program • Get resources/support ready • Get employees involved • Insert deadlines and demand measurable outcomes

  9. Case study: Lincoln Electric in China

  10. Background • Lincoln Electric as a model of pay for performance • Measurable goals • Intensity of incentive plan • Remarkable results • Does this model work for other industries or other lines of work? • What are the implications for international management?

  11. Questions for discussion • How does LE’s management style and incentive design fit the Chinese context? • What is your view of LE’s efforts in its setup process in China? Would you do anything differently? Why? • What is your recommendation for the next step?

  12. Summary and Conclusion

  13. Question revisited: Why do large, successful companies fail?

  14. The case of Intel • Background: Industry dominance • The changing environment • Multimedia beyond computing chips • Why failure? • Confined to expertise within own company • The change of strategies • From speed to new markets • Challenges from competitors: A.M.D., Microsoft.

  15. Overview of the course Leadership Agents Recipients

  16. Sharing experience: What is your main lesson about managing organizational change?

  17. Why good companies go bad?(Donald N. Sull 1999) • It is not paralysis, not unawareness, not inaction. • The inability to take appropriate action • Active inertia – tendency to follow established patterns of behavior, even when environment changes. • Example: the Firestone Tire and Rubber Co. • Dominant position in the early 1970s • Response to Michelin’s radial tire – old standards • Delay in phasing out bias tires • Lost market shares and dominance in the industry

  18. Sources of active inertia • Structure and interests • Ford’s T-model • Organizational filtering and interpretation • The pooling of experience • Competence trap • In the time of change, past success can become obstacle: • Strategic frames  blinders • Processes  routines • Relationships  Shackles • Values  Dogmas

  19. For mid-level managers • Be clear what role you want to play • Change agent? • Entrepreneurial managers, early adopter, catalyst? • Imitator, follower? • Invest in your social capital • Different networks for different purposes • Mobilize resources • Protect your interests • Build coalitions • Be adaptive • Happiness belongs to optimists!

  20. About final examination • Format of examination: • Essay questions (choose three of four) • Discussion on business scenarios • discussion on key issues/lessons in organizational change • Contents to be examined: • Cases discussed in class • Key readings assigned for reading • Issues discussed in class

  21. Thank you and enjoy the final exam!

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