Successful organisations lead change they don’t just manage it
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Successful organisations lead change they don’t just manage it
In the modern day climate of uncertainty in business, the ability of a company to change with the times is crucial to its survival. Wells (2010) suggests that one of the greatest concerns among business leaders, due to the sudden economic upheavals, is their organisation’s ability to react in time and be agile. He further suggests that for the company to engender these abilities within their organisational blueprint, they need to lead change from the top for maximum results. In a recent report released by Buck Consultants, it was found out that successful organisations are those that lead change, as opposed to just managing it (Wells 2010).
Every day, the businesses environment is always changing; it is necessary that change is properly handled for a firm to keep competing in today’s global market. However, identifying the need for change is not sufficient – a good business must be able to implement its change process effectively. Most big companies especially in the UK are making significant changes to their structures to cope with present and future challenges. In the survey by Buck Consultants in 2009, over two thirds of the sampled companies had implemented significant organisational change in the previous 12 months and almost all had plans for further changes in succeeding years. The study found that most frequent organisational changes in today’s business world involve:
- Restructuring of the current workforce
- Aligning the company in a new strategic direction
- Streamlining current technology and processes
While most organisations are changing, it is notably with mixed levels of success. Only slightly over half (54%) of those surveyed admitted that the changes made over the previous 12 months were perceived as successful by the respondents. This means that almost half of all changes initiated by organisations fail to realise the intended results.
For the organisations found to be successful, the study found out that there were a variety of similarities and differences in the way these organisations implemented change. Through assessment of their different change programmes, and the outcomes of the survey, it was found that several common activities appeared to influence success. The three most common traits are:
- Better preparation for change
- Greater involvement of staff
- Internal collaboration and teamwork
Oddly enough, the three seems to be aspects of a well led unit rather than a managed one. This implies that leadership is necessary for successful change. However, scholars have long attempted to differentiate between leadership and management.
Leadership and Management
It is crucial to distinguish the difference between management and leadership both of which are considered necessary for organisational success. While these terms are often used interchangeably, they are two distinctive and complementary processes. There is an interesting aspect to the ongoing debate surrounding the differences between management and leadership and it was first raised by Zaleznik (1977) in his article and more recently by Bennis & Nanus (1985) amongst others. Zaleznik questions if perhaps too many studies have been done at a small group level and leading too much of the theory focusing on management issues rather than leadership. Nevertheless, it is apparent that there are clear distinctions between the two, with leadership being seen as more outward looking and inspirational in driving change.
Yukl (1989) states that, “the essence of the argument seems to be that managers are oriented towards stability and leaders are oriented towards innovation; managers get people to do things more efficiently, whereas leaders get people to agree about what things should be done.” He states that leadership is more concerned with giving meaning, purpose and guidance to organisations whereas management is concerned with support, guidance and corrective feedback on a day-to-day basis by being task or people-oriented as is appropriate.
Management concerns itself with implementing the vision and strategy provided by the organisation’s leaders. However, there is a need for both functions in an organisation and in actual sense; leaders can become managers and vice versa judging from their approach and behaviour. Most literature suggests that managers can become better leaders by providing direction, vision, strategy and inspiration to the organisation and also by reinforcing the vision and values adopted over time. Kotterman (2006) notes: “the core activities of a manager and leader are simply different. The difference is one of focus, one outwardly focused, the other internally.”
Perhaps the greatest challenger of the notion that management and leadership can be interchangeable is Professor John Kotter of Harvard Business School. He states that leadership is different from management but not for the reasons most people think. He however clarifies that if either is missing in today’s competitive environment, the organisational success would be elusive. He highlights the common mistakes made as follows:
Mistake #1– Use of the terms “management” and “leadership” interchangeably. He states that this means people don’t appreciate the crucial difference between the two and the functions that each role plays in an organisational setting.
Mistake #2– Use of the term “leadership” to refer to persons at the top of company hierarchies while referring to those in the layers below them as “management” and then the rest being called workers, specialists, and individual contributors. He states that is very misleading.
Mistake #3– People thinking of “leadership” as involving only personality characteristics, what they mostly call charisma. He argues that few people have charisma, which could be wrongly interpreted to mean that few people can provide leadership.
He concludes with the following points:
- Leadership isn’t mysterious or mystical.
- It has nothing to do with charisma.
- It is not dependent on exceptional personal characteristics
- It is not for a chosen few (Kotter 2013)
Warren Bennis and Bert Nanus (1985) were of the opinion that leadership is one of the many assets that a successful manager must have. The main aim of a manager is to maximize the output of his/her organization by administrative implementation. This means that managers must undertake the following roles:
- directing
- organizing
- planning
- staffing
- controlling
Leadership is considered an important component of the role of directing.
Conclusion
It is quite clear that most organisations do not have fundamental change capability, starting with leadership. While the current climate may pressure leaders to effect change quickly, they are more likely to benefit from more thoughtful considerations of the scope of change and their leading role in involvement of staff. In the modern world, few organizations have sufficient leadership (Kotter 2013). Unless organisations recognize that there is a distinction between management and leadership, all people will try to do when asked to lead is work harder to manage. This means that we might end up with under-led and over-managed organisations that find it increasingly difficult to operate in a dynamic world.
The Dutch Royal BAM group
The Dutch Royal BAM group is a construction company that is active in multiple states in Europe. Currently, the company operates in five markets including Netherlands, the UK, Ireland, Germany and Belgium. Compared to its competitors, the company enjoys top positions in these markets as it undertakes civil engineering and specialist construction projects in niche markets. The company’s administrative centre is in the Netherlands and it is listed in the country’s securities exchange. Apart from operating in the niche markets, BAM operated electrical services, private and public partnerships, sectors construction and mechanical services. The presence of the company in the five European nations does not mean that it only specializes in them. On the contrary, the company is active internationally where it has taken a number of active projects.
The company has a low turnover rate and currently employs around 25,000 people worldwide. These are both permanent and temporary workers who are utilized depending on the construction project.
The company’s balance sheet is a bit worrying as it indicates a risk that is represented by a growing number of receivables from public private partnerships meaning that the company is forced to pre-finance projects that it shares with the government. These PPP receivables substantially increase from 288 million to 406 million between 2011 and 2013. The risks however balance out with gains once the projects the company is involved in are successfully completed.
BAM’s share capital has substantially increased from €735 million to €833 million since 2012. This means that the company’s solvability has been improved. In 2012, BAM made a loss of €183 million but bounced back with a €47 million profit in 2013. The company undertook a strategy of employee reduction and also reduced its expenses which led to the profits that it made. Impairments also decreased from €366 million to €42 million in this period indicating that the strategy the company implemented was successful. The problem for the company’s seemingly weak financial position is the challenging nature of domestic markets which are only recovering from the global downturn especially in housing.
The fact that BAM is operating from a weakened financial position should be troubling for its leaders and managers alike. The former have a more long term outlook compared to the latter that focus on short term objectives. The main consideration for BAM should be the development of a sound strategy and complimenting it with a good work process. Leaders’ main challenge is thus how to actualize the strategy and the work process. One of the major hindrances to a successful strategy is the organizational culture. Organizational cultures should be formulated in a way as to foster motivation in employees so that they produce beyond their normal capacities. A second problem that needs addressing is technology that together with culture must complement each other in order for optimum outcomes to be produced. Other problems that leaders must address include the structure of the organization and its emotional intelligence.
Business growth is usually accompanied by success that leaders and managers seek to impart at its core and ensure that personnel repeat. Managers, in their clamour for repetition, will naturally add layers to the business structure which lead to a mechanistic organization. Bureaucratization of organisations leads to a rigid structure that curtails the business from adopting changes in the environment. Bunnell (2000) cites the example of Cisco, the successful information technology company as having a flexible structure that allowed it to assimilate changes faster and be ahead of the competition. While managers inevitable push organisations to become mechanic, leaders pull them to make them more organic where all personnel are empowered to contribute to decision making. There are organisations that have successfully kept business departments at low numbers and thus preventing them from curtailing their own growth. HP for example ensures that there are not more than 1000 employees in any department while 3M limits size of departments by requiring each to have less than $200 million in sales. Where such figures are exceeded, the company further breaks down that department.
While managers usually focus on having authority over subordinates, leaders on the other hand believe in having followers. BAM can benefit from this fact as its leaders will not keep employees without the right combination of knowledge, aptitude and skills. Constant appraisal of employees ensures that they are qualified, well equipped and motivated to function seamlessly within a team. Leaders are tactical meaning that they will entice their employees using rewards to influence and motivate (Gottfried 2011). BAM seeks to be a leader in niche markets meaning that it needs creativity and innovation not only to create a competitive advantage within those markets but also to come up with superior products that will define the industry. This can only be achieved by having highly motivated and qualified teams of competent individuals. Suggestions schemes, dual ladder systems, employee-of-the-month boards and bonuses are also some of the ways that leaders can ensure that they have motivated teams.
One fundamental difference between managers and leaders is that the former seeks to maintain a status quo while the latter challenges it (Mullins 2013). Thus, BAM leaders must ensure that there are no comfort zones in the company and that employees are continually challenged to identify need gaps in products and services and in turn plug them. BAM can benefit greatly from institutionalizing innovation. Companies like Cisco and HP got to the positions they enjoy in the global market system by continuously challenging the status quo in their respective industries at times when there were other bigger players. One way of challenging the status quo is by setting thresholds that require individual departments aspire to higher standards every year.
Leaders have the responsibility of rooting out any organizational policies or structures that may be a hindrance to progress. Therefore, there must be constant risk-taking in order to identify the areas where complacency might be rife. This does not however mean that unnecessary risks should be taken. Being a leader is a balance between ensuring measured progress and avoiding overeager decisions that will ruin the organization. Uncontrolled risk-taking can lead to the creation of ambiguities. There should therefore be effective information management tools that temper the management regime and ensure that there are adequate control measures for project milestones. BAM should learn that failure in certain projects is not kept from stakeholders of the organization but should be shared in order to ensure that the organization learns from its mistakes and does not repeat them. According to Paulson (2001), failed projects should be a source of pride for organisations as they indicate failed opportunities that should never be pursued again.
Collaboration is a very important process in leadership. The process starts with recognizing the contributions of employees within an organization. Consideration of their opinions not only leads to better ideas for innovation but also motivates them to challenge themselves. The next step in collaboration is ensuring that the organization is equipped with the right information. This gives management leeway to contract outside organizations where possible in order to have the opinions of experts including known innovators and qualified researchers. BAM must ensure that it possesses adequate and relevant information regarding the markets that it aspires to serve. The best information is sourced by experts. Thus leaders must have the inherent gift of recognizing the different talents in their human resources in order to get the most out of them.
Leaders unlike managers are more focused on the future of the company than its present. This means that they are constantly looking to create a competitive advantage that will benefit their organizations for a long time. This can only be achieved by having organizational intelligence which is the capacity for the organization to take advantage of an opportunity or adapt to a given environment by accessing, interpreting and manipulating information (McCall 2010). The intelligence that human resources possess can be collated to ensure that the organization takes reduces uncertainties and ambiguities. Tools for analysing competitors, for scanning environments and for forecasting on technology are some of the intelligent options that BAM should seek to employ in order to grow in international markets and also create opportunities in the markets it already operates in.
Recommendations
- Leaders must create an organisational structure that is not bureaucratised but rather is organic in order to respond to changes in the environment.
- Leaders should ensure that the organisation is grounded on a sound strategy that is complemented by work processes that communicate the ambitions of the business.
- Organisations must ensure that they use intelligence in seeking out opportunities and capitalizing on them using specific tools for analysis, forecasting, and scanning.
- The most important resources for any organisation are the human resources which must be valued. Collaboration must be sought to ensure that teams are made up of the most competent and motivated people to fill the various positions.
- Leaders must ensure that they are not overeager in their risk-taking endeavours and instead are calculating and tempered. This can be done through ensuring benchmarks are used developed through scientific means.
References
Bennis, W. & Nanus, D., 1985. Becoming a Leader, Philadelphia, Harper Paperbacks.
Bunnell, D., 2000. Making the Cisco Connection — The Story Behind the Real Internet Superpower. America, New York
Gottfried, A. E., 2011. Motivational roots of leadership: A longitudinal study from childhood through adulthood, Leadership Quarterly, 22(3), 510–519.
Kotter, J. P., 2013. ‘Management is (still) not leadership’, available at:
http://blogs.hbr.org/2013/01/management-is-still-not-leadership [accessed 3 December 2014].
Kotterman, J., 2006. Leadership vs Management: What’s the difference? Journal for Quality
& Participation, Vol. 29 Issue 2, p.13-17
McCall, M. W., 2010. Recasting leadership development. Industrial and Organizational Psychology, 3, 3–19.
Mullins, L., 2013. Management and Organisational Behaviour. London: Pearson.
Paulson, E., 2001. Inside Cisco: The Real Story of Sustained M&A Growth. New York: Wiley
Wells, B., 2010. Successful organisations lead change they don’t just manage it, available at: http://www.hrmagazine.co.uk/hro/opinion/1018014/successful-organisations-lead-change-dont-manage [accessed 3 December 2014].
Yukl, G., 1989. Managerial Leadership: a review of theory and research, Journal of Management, Vol. 15 Issue 2, p.251-290.
Zaleznik, A., 1977. Managers and Leaders: Are They Different, Harvard Business Review, January 1977.
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