Hack:
THE HARD- AND THE SOFT-SIDE OF CORPORATE REORGANIZATIONS

 

Opening remarks

 

BCG recently published a study showing how much harder it has become for companies to remain on top of their trade. And so, McKinsey found that on average large companies reorganize every 2-3 years, and that such programs take over 18 months. Change-management programs strain the whole organization, they may cause the senior management to lose some of  its credibility and top talents to leave. At the end, up to 25 % of them result in partial or total failure, but the acceleration of external changes also accelerates the need for change-management programs.

 

Of course, there are change-management programs and change-management programs, and we need to understand the differences and their strategic and organizational implications. Some change-management programs are great on communication but poor on content, and this led Greenfield & Bhain to say that “… the more grandiose the name the more severe the distress”. But, given the right leadership and the right approach these programs can substantially raise the organization’s competitive stamina.

 

So, under the above captioned title, I have published on LinkedIn a paper that should help you to review and to rethink related issues. Post your ideas and insights on this LinkedIn group and on my LinkedIn group <Agile Management Innovation>. My group focuses on Agile Management, the 4th generation of management, which requires a deep innovation of the management.

 

 

The different sides of the enterprise

 

Every enterprise is a complex and unique live-organism. To understand how it works, we need to understand its different sides and how they interact, namely: the past and the future time-horizons; the internal and the external environments; the hard- and the soft side of the enterprise. The aforementioned 3 sides are interdependent, but in this paper, we concentrate on the hard- and the soft-side of the enterprise.

 

To this effect, I refer to my map of the <organizational capital>. (1) On the left-side it shows the hard-side of the enterprise, which drives rational and result-oriented behaviors. On the right-side it shows the soft-side of the enterprise, which shapes relational and emotional behaviors.

 

So, on the left side of this map we have on top the <business-strategy>, and on the bottom the <systems of management>. On the right side of the map we have on top the <style of the leadership>, and on the bottom the <structures of the organization>. The <shared critical capabilities> are placed in the middle because they are driven by both the hard- and the soft-side of the enterprise. You can jot the 5 elements of this model of a piece of paper or refer to my Map 05 on my below referenced book.

 

 

The hard-side of enterprise and the typical reorgs

 

According to Faeste & Hemmerling (2), on the hard-side of reorgs we have short-term change-management programs designed to solve urgent bottom-line problems such as cutting costs and/or scaling sales. Such programs account for a large share of such programs, but often they merely engender pyrrhic victories.

 

The medium-term change management programs tend to focus on reforming the operations and on how the enterprise services its customers. They include change-management programs that involve the review and the redesign of the business-model. Some of these programs are what Osterwalder & Pigneur call “Value Proposition Design”, and they focus on the customer and on the deliverables. Some of these change-management programs, possibly to get quicker results, really focus on the hard-side of enterprise, and they only superficially involve the soft-side of enterprise.

 

 Faeste & Hemmerling also submit that change management programs should have a long-term view so as to organize for sustained superior performances.

 

 

The soft-side of enterprise and the programs of management innovation

 

The Katzenbach Center published in 2015 a survey that showed that corporate culture – typically a corner stone of the soft-side of enterprise – accounts for 80% of the success of change-management programs. The hard-side reorgs do not renew and reform the soft-side of enterprise, and therefore tend to produce more rumble than results.

 

For change-management programs that really focus on the soft-side of enterprise I prefer to talk about program of management innovation. Unlike reorgs that typically react to external factors such as competition or markets, programs of management innovation are driven by the leadership’s decision to reform the organization inside-out in order to sustain superior performances. To that effect, the CEOs who are viewing strategic and operational agility as a key issue to sustainable superior performances target their subject programs to boost the following 5 critical capabilities of their organization, namely: associative, ambidextrous, alert, adaptable, and agile. (1)

 

While the enablers of the strategies that drive the hard-side of enterprise are fairly obvious, the enablers of the soft-side of programs of management innovation are not. So, I advocate that we look at 3 factors, namely: the way people think, the way people behave, and the way people act. Their interactions show the workings of the collective mind-set. This perspective should enable the leadership to evaluate the roadblocks that stand in the way, and to device the best way to avoid or to eliminate them.

 

Buddha posited: “The mind is everything. What you think you become”. The way people think tends to shape the way people will behave and the way they will act. Finding out what people think of themselves and of others is not that all that difficult, what may be difficult is finding the time and place when people can feel free to talk their mind. Moreover, what the personnel of the enterprise think of themselves and of others can be also be qualified by asking some of the external partners of the enterprise.

 

The <style of the leadership> is a main driver of the official corporate culture. However, as Peter Scott Morgan pointed out, next to the official corporate culture there can be an unofficial culture, which is the way people really feel about themselves, about their colleagues, about their bosses, and about the management system. The greater the gap between the two cultures and the greater the difficulty in getting to the bottom of the problems, and to shape the collective mind-set.

 

The way people behave and the way people act are indicators for the way people think. But, if we do not set up first a collaborative mind-set and a creative culture, it may be difficult to change the way people act and the way people behave.

 

Highly intangibles elements like the collective mindset need to be supported by more tangible elements like the <structure of the organization> and of the <shared critical capabilities>, and then directed by the hard-side of the enterprise, i.e. by the <business-strategies> and the <systems of management>. In other words, programs of management innovation do not neglect the hard-side of enterprise, they just start with the soft-side, which is more delicate, and then they align the hard-side on the soft-side.

 

 

Closing remarks

 

The leadership should always put in the proper perspective “what we want” and “what we can”. Unless the hard- and the soft-side work well together, “what we want” will not be supported by “what we can”.

 

Machiavelli cautioned: “There is nothing more difficult to manage than the creation of a new system. For the initiator has the enmity of all who would profit from the preservation of the old institution, and lukewarm defenders in those who would gain by the new one”. Prof. Mathias Finger, teaching at the Swiss Institute for Civil Servants, posited: “Everything that is mobile globalizes; everything that is not localizes and socializes”. The persons profit from the preservation of the old institution will most likely socialize to find support for their position, while deceptively pretending to support change.

 

In my last book referenced below, I discuss Agile Management which involves innovating

the management at its core. I propose combining the talk and the tools of agile projects in order to achieve an “agile program of management innovation”. Such a program has the advantage of really involving a critical mass of people in making the change happen, and to ensure that the achievements from this program will continue to act as a catalyst for the appropriate innovations of the management.

 

 

Bibliography

 

1. W. A. Sussland “The Platform of Agile Management and the Program to Implement It” Routledge 2017

2. L. Faeste & J. Hemmerling “Transformation“ BCG 2016

3. Osterwalder, Pigneur, Bernarda, Smith “Value Proposition Design” Wiley 2014