Chapter 1: Managing Change (Stories and Paradoxes)

A. The Story of Beth Israel Deaconess Medical Center

1. Setting/Background

- This case is about Corporate turnaround, rescuing the organization from financial
disaster and restoring its reputation, competitiveness, and profitability.
- The Beth Israel Deaconess Medical Center (BID) was created in 1996 by the merger
of two hospitals: Beth Israel (casual management style that encouraged professional
autonomy and creativity & Deaconess Hospital was known for its rules-based, top-
down management
- After the merger, the Beth Israel culture dominated, and many Deaconess staff,
especially nurses, left to join the competition.

2. Problems

- By 2002, BID was losing $100 million a year (financial meltdown). There were
problems with the quality and safety of care, with low staff morale, and with poor
relationships between clinical staff and management. The media attention was
damaging BID’s reputation.

3. Solution

- External management consultants recommended drastic measures to turn around

the hospital’s finance. Then, and several hundred jobs were lost, in an attempt to
restore financial balance
- Pointing new CEO (Paul Levy)
- Turnaround strategy was based on two themes: transparency (Share with all staff
the full scale of the financial difficulties) and commitment to quality (signal
absolute commitment to the continuous improvement of quality, in order to build
trust and to establish a sense of common purpose)
- Operating plans had four goals, addressing quality and safety, patient satis-
faction, finance, and staff and referrer satisfaction. One aim was to make staff
proud of the outcomes and create a sense of achievement.
- introduced an initiative that cut “central line infection” rates, reducing costs as
well as harm to patients and providing the motivation for more improvements.

4. The outcomes

- By 2010, BID was one of the leading academic health centers in the United States,
with 6,000 employees and state-of-the-art clinical care, research, and teaching. BID
was generating annual revenues of over $1.2 billion.

5. Five factors that explain the success of this corporate turnaround

- The sense of urgency, the “burning platform,” created deliberately by the new chief
executive, who was open with all staff about the true position concerning the
hospital’s finances.
 - The focus that was consistently maintained on improving the quality and safety of
patient care, which appealed (perhaps more than budget layouts) to the professional
values of clinical staff.
- The phased approach that involved, first: fixing the finances; second: repairing
medical-managerial relationships and getting staff involved in operational plans;
and third: focusing on safety issues and eliminating harm.
- Making hospital and department performance data available to staff, the public, and
the media, to inspire pride in achievement and to stimulate further improvements.
- The creation of a “leadership constellation” through the appointment of other senior
staff who understood and who supported the chief executive’s goals and strategy

6. Insights due to cornering the role of the change leader

- One does not need specialist sector knowledge and experience to drive a corporate
turnaround. But has to make sure that had access to those specialist resources
though his other senior appointments.
- Have to has a confidence in the management approach. That confidence may be as
important as the style—maybe a different style, applied consistently, could be just
as effective, especially when it involved laying off a number of staff soon after
taking up his new post, and standing up to the board of directors and defending a
view different from theirs.

7. Lesson Learned about managing organizational change

- a new “straight talking” chief executive with clear and consistent goals, an inclusive
management style, a strong management team, and a transparent approach to the
use of performance data to motivate improvement could be a highly effective
combination.
- creating a strong and stable senior team, using “leadership constellations” to drive
change, a participative management style, staff engagement, open communications,
and transparency of performance information that is used for feedback,
performance management, motivation, and reward purposes.

B. The Story of The Sears Holding Story

1. Setting/Background

Sears Holdings Corporation was a specialty retailer, formed in 2005 by the merger of
Kmart and Sears Roebuck. The merger was the idea of Eddie Lampert, a billionaire
hedge fund manager who owned 55 percent of the new company and who became
chairman. Sears and Kmart stores sold home merchandise, clothing, and automotive
products and services. The merged company was successful at first, due to aggressive
cost cutting.

2. Problems

- By 2007, two years after the merger, profits were down by 45 percent.
3. Solution

Lampert decided to restructure the company. The new model ran Sears like a hedge
fund portfolio with autonomous businesses competing for resources. This “internal
market” would promote efficiency and improve corporate performance. Lampert prefer
the decentralized structures though it might appear ‘messy’ but its more effective than
the integrated structures. At first, the new structure had around 30 business units, by
2009, there were over 40 divisions. The reorganization has made the company’s share
price rose 12 percent. Then, Lampert has new innovative ideas to engage with
employees, by setting up a company social network “Pebble” under “Eli Wexler”
pseudonym to criticized other people’s posts and argued with store associates until
finally the staff worked out Wexler was Lampert.

4. The outcomes

- Instead of improving performance, the new model encouraged the divisions to turn
against each other. Many experienced executives left the company, frustrated by
the impact of the restructuring. Lampert evaluated the divisions, and calculated
executives’ bonuses, using a measure called “business operating profit” (BOP). The
result was that individual business units focused exclusively on their own
profitability, rather than on the welfare of the company. For example, the clothing
division cut labor to save money, knowing that floor salesmen in other units would
have to pick up the slack. The business was ravaged by infighting as the divisions—
behaving in the words of one executive like “warring tribes”—battled for resources.
There was no collaboration, no cooperation. The Sears and Kmart brands suffered.
Employees gave the new organization model a new name: SORE.

5. Four things of Eddie Lampert’s turnaround strategy

- Lampert could be described as a transformational leader.

- He was highly intelligent and decisive.
- He was innovative, concerning both the company structure and its service delivery
- He had a clear and interesting vision for the online future of the business. Check
out “Shop Your Way” for yourself.

6. Mistakes Eddie Lampert’s made

- He appears to have been an autocratic leader for not condering others views
including his senior colleagues before making business-critical decisions.
- Being recluse, preferring to meet with his division heads infrequently, and through
a video link (and he rarely allowed media interviews).
- His “engagement” with staff through the company’s social network was more
confrontational than consultative.
- The new model Lampert’s made, however, made it easier for Lampert to set up
the online business as a division run independently of the other units. It may thus
be too early to assess the longer-term overall success of that organization
restructuring.
 7. Suggestion for Eddie Lampert that he could’ve done differently

- A more prudent approach in this case would probably have been to listen to the
views of colleagues, at all levels of the company, and to take those into account
before imposing that reorganization. There could have been many other ways in
which to achieve the required end results, including improved divisional and
corporate performance, and data transparency. Whatever restructuring was
implemented, it was probably going to be more successful if those who were
affected understood the decision, had contributed significantly to it, and had agreed
with it.

8. Lesson Learned
- Change leaders need to adapt their style to fit the context. An autocratic style can
rapidly resolve a crisis. In other circumstances, “decisive action” may leave others
feeling that they have been excluded, and they may decide to undermine decisions
that they feel were ill-advised (especially where the approach was considered to be
idiosyncratic) as well as imposed on them.

C. The Story of J. C. Penney

1. Setting/Background
This case is concerns innovative efforts to restore falling sales and a fading brand at J.
C. Penney, a retailer. J. C. Penney Company, Inc. (known as JCPenney, or JCP for
short) was one of America’s largest clothing and home furnishing retailers. The
company’s main customers were middle-income families, and female. JCP had a
“promotional department store” pricing strategy with a confusing system of product
discounts.

2. Problems

- The recession in 2008 affected sales badly; core customers had mortgage and job
security problems. Between 2006 and 2011, sales fell from $19.9 billion to $17
billion. In 2008, JCP struck a deal with Ralph Lauren to launch a new brand,
American Living, sold only in their stores. But JCP was not allowed to use Ralph
Lauren’s name or the Polo logo. The idea failed. Sales continued to fall, the
products sitting on a shelf doing nothing for over a month until it sold in discounted
price 6 weeks after.

3. Solution

In November 2011, Ron Johnson was appointed chief executive officer. In December,
after one month in post, he presented to the board his plans to revive the company with
a fundamentally new way of doing business. The board agreed:

- First, he wanted to transform the culture by changing the old logo into the new one.
For a week, staff threw “old Penney” items into the cube: T-shirts, mugs, stationery,
pens, tote bags.
- Second, no more promotions because it is not reasonable to wait six weeks to mark
an item down to the price at which it would sell, so they sell at that price from the
 start. The stores were tidier, with no messy clearance racks, and the customer
relationship became “fair and square” (another slogan).
- Third, Johnson developed a “store within a store” strategy, with each store
becoming a collection of dozens of separate “boutiques.” He wanted a higher
percentage of younger and higher-priced brands. Hundreds of stores were to be
redesigned by the end of 2012.
- Forth, Johnson wanted to make checkout simpler, with roving clerks taking
payment on iPads. Millions were spent on equipping stores with Wi-Fi.
- Fifth, he decided to separate the store buying group from the JCP.com buying
group, an approach used by Apple. This meant that there was no coordination
between what was available online and what customers could find in the stores.
Johnson was more concerned with “the look and feel” of the physical stores, and
less support went to the website.
- Sixth, Johnson hired his own new team of top executives, who distanced themselves
from the existing staff; most of them refused to move, flying there weekly instead.
One director called the “old” staff DOPES: dumb old Penney’s employees.
Veterans called the new team the Bad Apples.
- The new team recruited Ellen DeGeneres—a television celebrity and lesbian—to
appear in JCP advertising. Then a conservative group, One Million Moms,
threatened a boycott, claiming that, “DeGeneres is not a true representation of the
type of families that shop at their store. The majority of J.C. Penney customers will
be offended and chose to no longer shop there.” The relationship with DeGeneres
was discontinued.
- Johnson introduced a new exchange policy; customers could return an item, without
a receipt, and receive cash. This policy was immediately abused, and one popular
item was returned so often that its sales turned negative..

4. The outcomes

- During Johnson’s two-year tenure, the price of the JCP stock fell by almost 70
percent, and sales fell in 2012 by 25 percent, resulting in a net loss of $985 million.
JCP had alienated its traditional customers, who were used to shopping for
discounts, but had not attracted new ones, and 20,000 employees had lost their jobs.
- In April 2013, the company chairman told Johnson that the board would be
accepting his resignation; within a few weeks, all but one of the other senior staff
hired by Johnson had also left.
- Mike Ullman was reinstated and immediately restored the old promotional pricing
model.
- In May, JCP ran an “apology ad,” with an earnest female voice admitting, “We
learned a very simple thing, to listen to you.”
- Ullman reintegrated the stores and online buyers, resulting the traditional sales in
stores started to grow slowly, and by November, Internet sales had increased by 25
percent on the previous year. Sales of the private brand merchandise lines that had
been restored also began to return to previous levels.
- The JCP brand had been damaged. Sales per square foot of shopping space had
fallen steadily since 2010. With sales and profitability falling, in January 2014, JCP
closed 33 underperforming stores (3 percent of the total), with 2,000 layoffs. This
 reduce annual operating costs by $65 million, but the company had made a loss of
$1.4 billion in 2013. JCP stock continued to fall in the first half of 2014.

5. Aspects of Ron Johnson’s turnaround strategy were appropriate/praiseworthy

- First, he was charismatic, passionate, energetic, and persuasive, using theatrics (the
acrylic cube) to draw attention and generate excitement. These are useful
characteristics for change leaders to possess.
- Second, he was highly innovative, bringing lots of fresh ideas to a long-established
and stale organization.
- Third, he was action-oriented and wanted to move quickly, to bring about radical
change rapidly.

6. Mistakes did Ron Johnson make

- Ignoring the company’s traditional core customers was probably his first and most
serious mistake. (no market research, either directly with customer groups or
indirectly through store staff and managers, to develop a better understanding of the
buying habits and preferences of JCP customers). This lack of customer knowledge
led to some disastrous marketing, and to pricing and merchandising strategies that
alienated core customers without attracting new shoppers.
- Second, he allowed his new top team of “outsiders” to distance themselves from
the existing JCP managers and staff. This meant that the top team had restricted
access to the business knowledge stored in the corporate memory, and it also created
unnecessary tensions between the DOPES and the Bad Apples.
- Third, he made critical decisions based on his own judgement, dismissing the views
of other senior executives.
- Fourth, he acted rapidly. While speed may be necessary, especially in a crisis,
introducing so many changes at a quick pace was destabilizing.
- Finally, he did not pilot test his big ideas before committing the investment and
implementing them. Johnson’s approach to change at JCP had two other adverse
consequences. First, he damaged the brand image, and that would take time—
perhaps years—to repair. Second, he closed the door to any future JCP chief
executive who might be tempted to play the part of charismatic innovator.

7. Suggestion for Johnson that he could have done differently

- The first suggestion concerns better customer intelligence.

- Second suggestion concerns testing new ideas in a small number of representative
outlets to see how those would work before committing the whole organization.
- Third, integrate new with existing staff: teambuilding, corporate events, job
rotations and partnerships, insisting that senior staff move to Dallas.
- In summary, these suggestions concern market research, pilot testing, recruitment,
and promotions policy.
- However, this does not suggest that changes should have been made slowly, just a
little less rapidly. That would have allowed mistakes and wrong turns to become
 apparent, so that they could be withdrawn, lessons learned, and revised plans put in
place.
- A final suggestion for Ron Johnson would be: ask your board to probe and to
challenge your decisions, and listen carefully to what they say.

4. Tension and Paradox: The State of the Art

- Tension : when two or more ideas are in opposition to each other.

- Paradox : when two or more apparently correct ideas contradict each other.
- adopting a multiple perspectives approach to the manage- ment of organizational
change :
a. First, a perspective that works in one context may not work well in a different
setting
b. Second, this is a way of opening up debate
c. Third, multiple perspectives encourage the search for creative solutions
- What works well in one setting may not work well in another. The broad outlines
of a good change strategy are widely known and accepted. What matters is the
detail, concerning how a strategy or intervention is designed for a particular
organization.

a. Many Variables: even with simple changes, the impact is multidimensional, and
measuring “effectiveness” has to capture all of the factors to produce a complete
picture
b. Slippery casuality: it is difficult to establish cause and effect clearly across
complex processes that unfold over time, usually at the same time as lots of
other changes
c. Many stakeholders: different stakeholders have different views of the nature of
the problem, the appropriate solution, and the desirable outcomes
- Main Tensions and paradoxes in managing organizational change:
a. Should we focus on transformational changes, or do we need to “sweat the small
stuff” as well?
b. Should change be a rational, systematic process, or do we need to recognize the
political dimension?
c. What is more important, organizational capabilities or indi- vidual skills in
implementing change?
d. Should we accelerate the changes or adopt a more measured pace?
e. Do we rely on one change champion or recognize the distributed contributions
of many change agents?
f. Once we have “learned the lessons” from a crisis or other extreme event, how
do we ensure that these are put into practice?
5. Assessing Depth of Change

6. What’s Coming Up: A Road Map

7. Summary of Chapter 1

Stories can be read as process narratives, which explain what happened in a given context.
These explanations are therefore theories of change, pointing to the combination of factors
interacting over time, leading to more or less successful change. While those theories cannot
be copied simply to other organizations and contexts, they are still a rich source of general
lessons, and aspects of one organization’s approach can be adapted to fit other organizational
contexts, if appropriate.

As with management practice in many other areas, what is going to work well when it comes
to implementing change depends on the organizational context. While general guidelines help
to identify the factors to take into consideration, the details have to be determined by local,
informed management and staff judgement. That is a creative process. Establishing cause and
effect with regard to change and outcomes is made difficult by the many variables, and the
many stakeholders typically involved.
Chapter 2: Images of Change Management

1. Change Agents, Managers, and Leaders differences

Change agents are those who drive and implement change. It’s typically refer to anyone
who has a role in change implementation, regardless of job title or seniority. According
John Kotter (2012), change management refers to the basic tools and structures with which
smaller-scale changes are controlled. Change leadership, in contrast, marshals the driving
forces and visions that produce large-scale transformations.

This argument has two flaws:

- The first concerns the assumption that large-scale transformations are more meaningful
and potent, and are therefore more valuable than small-scale change. They are not, as
the discussion of “depth of change”
- The second flaw in the argument concerns that while it may be possible to define clear
categories in theory, in practice these roles are overlapping and indistinguishable:
How would you like to be managed by someone who doesn’t lead, or led by someone
who doesn’t manage? We should be seeing managers as leaders, and leadership as
management practiced well.

Hence, management versus leadership is not a distinction worth arguing over, and may
be more simply resolved by a combination of personal and contextual preference.

2. Images, Mental Models, Frame, Perspectives

According Morgan, (2006); Hatch and Cunliffe, (2012); Bolman and Deal, (2013), more
important than the terminology, the internal mental images that we have of our
organizations influence our expectations and our interpretations of what is happening, and
of what we think needs to change, and how.

Images, metaphors, frames of reference, or perspectives which can also be described as

mental models color our thinking, perceptions, and actions help us to make sense of the
world around us, by focusing our attention in particular directions. The key point is that,
while an image or mental model is a way of seeing things, a standpoint drawing our
attention to particular issues and features, it is also a way of not seeing things, shifting our
attention away from other factors, which may or may not be significant.

There are no “right” and “wrong” images. These are just different lenses through which
the world in general, and organizations in particular, can be seen and understood. The
images or lenses that we each use reflect our backgrounds, education, life experi- ences,
and personal preferences. Those who are responsible for driving and implementing change
also have their own images of organizations—and more importantly, images of their role
as change manager. Those images clearly influence the ways in which change managers
approach the change process, the issues that they believe are important, and the change
management style that they will adopt.

Change management has two importance:

- To understand one’s personal preferences—perhaps biases—in this regard
- To be able to switch from one image of the role to another, according to circumstances.
3. Six-Images Framework

Image or mental models of organization and Change Formed: Ian Palmer and Richard
Dunford (2002) first identify two broad images of the task of managing, which can be seen
as either a controlling or as a shaping activity. Then identify three broad images of change
outcomes, which can be seen as intended, partially intended, or unintended.

Management as Controlling:

- Henry Fayol described what managers do, captured by the clumsy acronym
POSDCoRB. This Stands for Planning, organizing supervising, directing,
coordinating, reporting, and budgeting activities that the change manager, as well
as the general manager, may be expected to carry out. This reflects a “top-down,”
hierarchical view of managing, associated with the image of organization as
machine.
- Properties of controlling: First, companies are able to measure them in direct or
indirect ways. Second, companies can easily communicate their importance, both
within and outside organizations. Third, and perhaps most important, businesses are
capable of influencing those elements quickly.

Management as Shaping:

- This image of management as a shaping function, enhancing both individual and

organizational capabilities. This image is associated with a participative
management style that encourages involvement in decision making in general, and
in deciding the content and process of change in particular.
- Employee involvement in change is based on two assumptions. First, that those who
are closest to the action will have a better understanding of how things can be
improved. Second, that staff are more likely to be committed to mak- ing changes
work if they have contributed to the design of those changes.

Intended Change Outcomes:

- The dominant assumption of this image is that intended change outcomes can be
achieved as planned.
- three broad strategies for producing intentional change:
a. Empirical-rational strategies assume that people pursue their own self-interest.
Effective change occurs when a change can be demonstrated as desirable and is
aligned with the interests of the group who are affected. Where change has those
properties, then intended outcomes will be achieved.
b. Normative–re-educative strategies assume that changes occur when people
abandon their tra- ditional, normative orientations and commit to new ways of
thinking. Producing intentional outcomes in this way involves changes in
information and knowledge, but also in attitudes and values.
c. Power-coercive strategies rely on achieving the intended outcomes through the
compliant behavior of those who have less power. Power may of course be
exercised by legitimate authority or through other, less legitimate, coercive
means.
 Partially Intended Change Outcomes:

- In this image, it is assumed that some, but not all, planned change outcomes are
achievable.
- Both intended and unintended consequences may emerge from the actions of
change managers; intended outcomes may be adapted along the way, or externally
imposed forces may modify what was originally intended. For these reasons,
change initiatives do not always deliver the outcomes that were planned.

Unintended Change Outcomes

- This image recognizes that managers often have great difficulty in achieving the
change outcomes that were intended. This difficulty stems from the variety of
internal and external forces that can push change in unplanned directions. These
internal and external forces typically override the influence of individual change
managers, whose intentions can be easily swamped.

4. Six Images of Change Management

Change Manager as Director (Controlling Intended Outcomes)

- The director image views management as controlling and change outcomes as

being achievable as planned. The change manager’s role here, as the title indicates,
is to steer the organization toward the desired outcomes. This assumes that change
involves a strategic management choice upon which the well-being and survival of
the organization depends.

Change Manager as Navigator (Controlling Some Intended Outcomes)

- In the navigator image, control is still at the heart of management action, although
a variety of external factors mean that, although change managers may achieve
some intended change outcomes, they may have little control over other results.
Outcomes are at least partly emergent rather than completely planned, and result
from a variety of influences, competing interests, and processes.

Change Manager as Caretaker (Controlling Unintended Outcomes)

- The management role is still one of control, although the ability to exercise that
control is severely constrained by a range of internal and external forces that propel
change relatively independent of management intentions.

Change Manager as Coach:

- The assumption is that change managers (or change consultants) can intentionally
shape the organization’s capabilities in particular ways. Like a sports coach, the
change manager shapes the organization’s or the team’s capabilities to ensure that,
in a competitive situation, it will be more likely to succeed. Rather than dictating
the state of each play as the director might do, the coach relies on establishing the
 right values, skills, and “drills” so that the organization’s members can achieve the
desired outcomes.

Change Manager as Interpreter:

- The change manager as interpreter has the task of creating meaning for others,
helping them to make sense of events and developments that, in themselves,
constitute a changed organization. It is up to change managers to represent to others
just what these changes mean. However, there are often competing interpretations
of the same issues, especially where there are different groups who do not
necessarily share common interests and perceptions. This suggests that only some
meanings—and therefore some change intentions—are likely to be realized.

Change Manager as Nurturer:

- The image of change manager as nurturer assumes that even small changes can
have a large impact on organizations, and that managers may be unable to control
the outcomes of these changes. However, they may nurture the organiza- tion,
developing qualities that enable positive self-organizing. Specific directions and
outcomes of change cannot be intentionally produced but rather emerge and are
shaped through the qualities and capabilities of the organization.
5. Using Six-Image Framework
There are three interrelated issues where reflection on the part of the change manager is
valuable:
- Surfacing Assumptions about Change
Being aware of the mental models with which we work helps us think more
carefully about their relevance—and the extent to which the assumptions they entail
are really ones that are going to be of assistance to us in approaching organizational
change. Being aware of these images enables change managers to assess the
assumptions that are being made by others with whom they are working or
interacting or from whom they are taking advice. Resulting from this assessment
may be actions to reorient the images others have of the particular change in which
they are involved by providing new images through which the change can be seen.
It requires encouragement of conversations around images and assumptions about
the anticipated change, testing these with the group, and ensuring that all members
of the team share common change image(s). This ensures that individual change
managers are not talking past one another and making assumptions that are not
shared by others.
- Assessing Dominant Images of Change
The six-images framework encourages change managers to reflect on whether they
are dominated by one particular image, and on the limitations of that perspective.
The framework also directs attention to whether the organization in which the
change is to occur is dominated by a particular view of what is achievable and how
change should unfold. In this case, change managers whose images are not
consistent with the dominant organizational image may experience frustration and
stress as they work with a change that may be seen as less legitimate or irrelevant.
- Using Multiple Images and Perspectives of Change
One of the advantages of exposure to the range of images is to reduce the likelihood
of a change manager using a single image because of a lack of understanding of the
range of options. The six-images framework directs attention to the range of
available options and to how their use may vary between contexts. A conscious
choice of image-in-use can be based on at least the following four sets of
considerations. Image-in-use depends on the type of change. Change managers may
assess some types of change as being more amenable to one image or approach
rather than another. Change managers are thus advised to adjust their image of
change, and the perception of what is possible, depending on the situation. Change
processes pass through different phases. Change managers may thus choose to use
different images at different stages of the process, or depending on perceptions of
the phase that change has reached. Skilled and reflective change managers should
be able to adapt, to move between images depending on how conditions are
developing. It may also be appropriate to manage simultaneously with multiple
images where these are related to different but concurrent initiatives.
6. Summary of Chapter 2

- The term change agent traditionally refers to an external consultant or adviser, and while
that role is still common, the term today is used more loosely, to refer to internal as well as
external change agents.

- The outcomes of change do not always depend entirely on the decisions and actions of those
who are implementing change. Change outcomes are often affected by events and
developments outside the organization, and which are beyond the direct control of individual
change managers, whose intentions may be swamped by those external factors. How change
managers see those outcomes is therefore a significant component of their image of the
change management role. Combining these images of managing and of change outcomes
leads to the six images of managing organizational change summarized in table below: