The Leaders Role In Organisation Transformation

With disruptive innovation and global competition forcing organisations to transform their business models yet the transformation is often painful and unsuccessful. Why is that even when the leadership recognises the value of the tools and approaches plans and outcomes fall short? We have found that it is essential for the leadership team to recognise the need for their own personal development has a critical impact on the success of the organisational change. It is the need for both personal and organisational development that needs to be addressed.

Some researchers and consultant s focus on bottom up transformation and have minimised the impact of the CEO on achieving the outcomes desired. We have found that the leaders support for and legitimising of the change effort is crucial to its sustained success. The leaders role besides the highly visible supportive role is to ensure that the systemic changes required are designed into the organisation. They need to ensure that it is not just a technical change process but also a political and cultural change that is achieved.

If the Leader and the leadership team to not exercise this transformational power that they will be the bottle-neck to the change. A term I often refer to is thinking becomes the constraint as opposed to a machine or process.

Case Studies

Over the past 15 years we have been involved in over 30 organisation development efforts spending on average over 4 years with each organisation and we are still working with some of these organisations. These organisations range in size from 10 to over 1000. The majority are based in either New Zealand or Australia but somewhere multinationals and had operations right across SE Asia. The organisations represented numerous industries. The initial focus for the majority of the companies was to focus on lean / continuous improvement but that was not always the case. As we worked with these companies or work often extended wider to look at business transformation, leadership development in order to achieve sustainable improvements. Many experience significant improvements, some achieved improvements and then slipped as we moved away from the organisation and then others made limited or no improvement. We found the more successful leaders understood that personal and organisational change required voluntary individual initiatives and not just top down hierarchical guidance. We also noted that those that were successful not only had competent leadership teams but also spent time developing others so their was greater potential right across the organisation.

In one organisation the leaders created a shadow management structure and enlisted the active involvement of both formal and informal leaders in designing and implementing the organisation changes. In others we deployed performance measures that could be controlled by the team and then got them to report on their scorecard. The CEO’s intuitively enabled shared visioning, discovery, team learning and development of personal mastery which in turn transformed mental models.

In organisations that changed minimally or not at all the CEO actually impeded change efforts either through benign neglect or through actions that impeded the change effort. One CEO for example who had failed to scale up and kept on reaching a ceiling to the growth would not engage in systematic sales planning and analysis as he believed this constrained entrepreneurial flair. On further analysis his action logic was that of an opportunist who had been successful in the entrepreneurial phase of the business but as the business grew and a different action logic was required he was not able to step up and actually actively undermined any attempts to change the organisation action logics. This organisations still struggles to scale up and remains a reactive, unsystematic organisation.

Individual and Organisation “Action Logics”

In order to further understand the characteristics of these leaders and organisations we referred to development theory. Development theory is based on a progression of capability that an organisation or individual may possess. Each stage of development serves as the foundation for the one that follows, that is, a person or organisation must master the characteristics of an earlier level before moving to the next one.

This development progression has been studied for over 40 years but is becoming recognised as more pivotal to organisation success as the environment becomes more global and competitive. It is testing organisations who may previously have succeed despite the lack of appropriate action logics but in todays environment they are increasingly exposed. Researches such as Jacques (19..)  and Rooke and Torbert (2007) have articulated both an individual and organisation development process. The table below offers a brief summary of the characteristics of managers and organisations at different stages of development. Jacques  ties this to the level of work that is required in an organisation so if it is absent then this inhibits the organisations ability to act. An Action Logic is a description of the assumptions individuals and organisations hold that affect their ways of making meaning of themselves and the world, of thinking, of action and of interpreting feedback.

The above table describes how managers make meaning of the world and then collectively how the organisation will act. It is when the organisation transformation requires a later action logic and the managers do not or are not able to act in an appropriate manner that this constrains the organisation. In our experience many organisations outgrow the managerial action logic required and this leads to a constraining of performance. Those leaders that either grow with the organisation or have a later action logic then the transformation process is more successful.

There fore the question is can you develop people’s action logic. The most important point to make is you can’t make people transform from one level to a later level. People must volunteer for transformation. The most obvious example of this is people who enrol for an MBA. The average for an MBA is around 28 and they have applied their expert knowledge and seek to move to the next level. The MBA program often uses case studies and this involves bringing together various disciplines to solve organisational problems. Many student  get through this and build successful careers but some students are not ready to think and act at this level and eventually drop out. Often it is not a function of intelligence but of the cognitive capability of the individual at that stage. They may grow with time but not always. The reason for this is that whilst wanting to change is not enough. The thinking of one’s current action logics tends to undercut under-cut efforts to operate at the next more encompassing action logic.

Another way is for the person to undertake an assessment of their cognitive capability and then to coach them on their current action logic and the requirements of the later level action logic. The Global Leadership Profile is one such approach that has provided valuable insights for development.

In one organisation we worked with the board was keen to develop the General Manager and we undertook the GLP and then based on the feedback we developed the person and then provided additional support to help the person transform. The General Manager given the information and understanding of the development process was able to engage in he process without feeling threatened. Structured workshops working with people who have the later action logic is also a way to develop the meaning making especially when there is a reflective session on the thinking behind the decisions and not just the decision. These stretch discussions start to create a greater understanding of how they make meaning of the challenges within their world and how this could be an inhibiting factor for the organisation.

At the start of the article we mentioned the challenging environment that many organisations find themselves with organisations seeking to be cost competitive and revenue resilient. Over the past 25 years lean has been the major management philosophy to drive cost resilience. The increased focus on design thinking and innovation is a management approach to drive revenue resilience to capture unique customer needs. When one considers that only about 10% of managers currently measured as exercising the Strategist action logic which is the first level at which the leader explicitly initiates transformation learning. Only 30% of managers are at the Achiever logic which would be a minimum for managers use single loop feedback to improve performance one can understand why such initiatives as lean and design thinking presents a challenge in small to medium sized business that have traditionally relied on entrepreneurial flair rather than a systematic approach to continuous improvement and innovation. It is essential to start with leadership and organisational action logic prior to embarking on transformational change otherwise there will be limited success.

We have experienced those leaders at the Diplomat action logic reject feedback on performance and feel threatened and rejected feedback on their personal leadership style and actively undermined the process claiming it was too theoretical and that he was “different”. Whereas the Strategist leader sought the feedback and shared it so that they could improve and worked constructively with the feedback.

It is essential for organisations to progress through these stages to increase its organisation capacity. In growing through the first 3 stages of transformation an organisation grows from a dream to a functioning productive social system. If it is to transform through the second three action logics (Experiments, Systemic, Productive and Collaborative Inquiry) the organisation gains the capacity to change its strategies an structures intentionally. Just as few people progress beyond the Achiever action logic few organisations evolve beyond Systemic Productivity and fail to meet their true potential. Given this it is clear that there is a war for talent and it is essential organisations focus on attracting and recruiting people at the Achiever or later action logic in order to transform and engage in organisation learning.

Leverage Points for Individual and Organisational Development.

Those that are serious about organisational transformation need to consider the significance of the organisation leaders role and that of the leadership team. Our experience that change can start anywhere in the organisation is not a valid assumption. Significant improvement can occur without the direct engagement of the leadership but for it to be sustainable they will need to be supportive and engaged.

If the leadership and specifically the organisation leader is resistant to feedback both negative and positive then this needs to be addressed early in the change process and the impact of their behaviour on the change process. We have found that addressing the levels of action logic and the organisation design opens up discussion but may be rejected as academic buzz words if the person is operating f rom one of the first three action logics.

Diagnosing the current level of management and organisation action logic provides a valuable platform to discuss organisation transformation. It allows you discuss the challenges you will face in the transformation process whether this change relates to business model strategy, lean or design thinking. It starts to “put the cards on the table” and there is a greater transparency but this requires a high level of trust and credibility between the facilitator and the leadership.

Embarking of a leadership program and organisation retreats that relates to their organisation but has embedded within the process the action logics and leadership feedback that you are developing. This is seen as relevant and applicable by the leadership team and is working on developing a later action logic. In these workshops the design has to be carefully considered as people grow through each action logic and they can’t be jumped so the program has to be pitched at the appropriate level. Also have a journal and exercises for the individual so they can work on their development plan and get mentor feedback on their progress.

Redesigning organisation systems and processes so that the appropriate behaviour is rewarded and meetings where frank and open discussions are held to facilitate the next level of action logic.

The challenge of transformational change is significant and there is an urgency for more organisations to get to grips with the process. The disruptive changes that are occurring means that a new level of thinking is required. Innovation, cost competitiveness, growth and responding to environmental change will not be possible without us developing a greater group of people who have a later action logic capable of addressing the challenges our society faces.