Guide to Successful Change Management

Part II - Chapter 03: Organizational Case Studies

Mike Green. Change Management Masterclass : a Step by Step Guide to Successful Change Management.. London: 2007. pg. 59, 87 pgs

Abstract (Summary)

The author tracked the management of change in seven organizations. There was a mixture of large and small organization. There was a mixture of public and private sector, and some in-between, organizations. There was a variety of leadership styles and a variety of change approaches adopted.

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Copyright Kogan Page Ltd. 2007

Introduction

Over the course of the last two years I tracked the management of change in seven organizations:

* the organizations were managing change relatively well;

* there was a mixture of large and small organizations;

* there was a mixture of public and private sector and some in between;

* there was a variety of changes being managed including a large scale global information system rollout, a Europe-wide restructure, a merger, a culture change, a start up and operational performance improvement;

* there was a variety of leadership styles; and

* there was a variety of change approaches adopted.

The organizations and their orientations

* Aster Group is a registered social landlord, very successful and expanding fast.

* The Institute of Public Health in Ireland was set up as a result of the Good Friday Agreement to foster better cross-border working on health matters.

* Biogen Idee is a global biotechnology company.

* The British Council has a worldwide presence in over 100 countries promoting education, development and the fostering of relationships between the UK and the rest of the world.

* The County of Aarhus is the largest county in Denmark, serving over 600,000 people, and has an innovative approach to managing change.

* A small entrepreneurial kitchenware company that has doubled turnover and increased profitability six-fold in six years.

* A primary school that has transformed itself into a highly effective school.

* A medium-sized financial services organization seeking internal realignment through restructuring.

Drawing in on ideas from the last chapter there follows a brief summary of how each organization oriented itself.

Aster Group

For Aster there were a number of internal and external drivers for change which shaped the future orientation. There was the move away from the local government culture and mindset towards a more entrepreneurial one; the untimely death of the Chief Executive; the significantly increasing competition in the sector; a continuing housing crisis in the UK with not enough new and affordable houses; and the Housing Corporation's decision to restrict the number of housing associations it did business with.

These factors led Aster to appoint a new chief executive who would meet these challenges and develop a strategy based on growth, building houses and securing efficiencies of service and economies of scale as it went. This was all underpinned by the need to create a culture that would underpin the delivery of this.

A number of growth strategies were considered but two stood out - organic growth through the acquisition of land to build new homes, and the possibility of partnering, merging or acquisition. Both needed to produce economies of scale and synergies across the organization.

This was later encapsulated in its vision - 'passion for excellence, pride in performance' - and its values: to be customer responsive; honest; open and true to their word; and fair to all.

Although quite clear about the direction, it realizes that sensitivity to the external environment is one of the key factors affecting its change process. In many senses it is operating under the organism metaphor.

The Institute of Public Health in Ireland (loPH)

The IoPH was set up as a result of the Good Friday Agreement to foster better cross-border working on health matters. The new Chief Executive had the authority to develop the Institute within quite broad parameters. Through careful and constant networking with a multitude of stakeholders the Institute developed a vision for tackling inequalities in health across Northern Ireland and the Republic of Ireland. This vision has been a critical factor in its success, and the many innovative programmes it has set up to do this suggest that its primary approach has been one of change through learning.

Biogen Idee

A key aspect for Biogen Idee in its orientation was its ongoing commitment to constantly reviewing and refreshing its global development, manufacturing and commercial capabilities in pursuit of its vision of making advances in human healthcare. It was uncompromising in its challenge of existing processes and practices and therefore didn't shirk from asking the tough questions of whether or not its European structure and way of doing business was fit for purpose. If it was challenging in this respect it was also very clear in adhering to its core values in making those challenges and subsequent decisions - quality, integrity, honesty and team as a source of strength being paramount. So the combination of having a clear vision about excellence in its field coupled with an emerging dissatisfaction with the status quo led it to start a review process into its European structure, which was the first practical step on the road to change. The approach that Biogen Idee took was a relatively planned one, given that the nature of the change was one of restructuring, which had a number of employment law implications. Having said that, the process was well planned and structured, but the solutions (moving its European HQ and the setting up of a number of centres of excellence) emerged from the process.

The British Council

The British Council's change originated from a strategic review. The review revealed the need to design and install a new information system throughout the UK and the rest of its global operations. This review had identified a number of internal and external drivers for change which impacted on the Council and moved the thinking towards an integrated system that would reduce costs, enable open data flow across all parts of the organization and allow decisions to be made at a local level in a competitive environment around the world. There was also a felt need within the organization for these changes to happen as staff wanted to provide a service to clients and customers without relying on old systems that didn't communicate. Culturally the Council also tried to engender openness of communication, customer service and a learning environment. There was dissatisfaction with the way the systems created a feeling of separate businesses and functional silos. In addition to these changes linking directly to the new vision and strategy there were clear outcomes required:

* total organizational information and communication integration;

* the breaking down of functional and departmental barriers;

* the same consistent real time information for all areas; and

* the capability to analyse data in a variety of critical ways, for example, budgets could be viewed at any sector, unit, country or regional level.

The County of Aarhus

In Aarhus the organizational change was contained within the county's organizational model. The model created a common language and frame of reference; it established the links between different parts of the organization and the decision-making process; and it clearly articulated the county's political goals. The model laid out very clearly the underpinning values and their behavioural indicators that any management of change needed to abide by, namely dialogue, openness, respect, willingness to develop, commitment and credibility. So, change in Aarhus was driven by a negotiation through dialogue between the citizens, their political representatives, the end users and the professional staff. Change management would be done through a process involving openness, transparency, mutual respect and dialogue.

The vision translated into providing a high level of professional care in a coherent and integrated fashion. The main driver for change was the mismatch between a structure based on professional lines and one which had the end user in mind.

The kitchenware company

The kitchenware company, which was purchased by two entrepreneurs, wasn't punching its weight in the market. It had poor product lines, a bad customer fulfilment reputation, high central overheads and demotivated staff. These drivers coupled with the enthusiasm of the new owners led to radical changes within the company. Focusing primarily on customers the company recognized it needed to refresh its product lines, change its fulfilment practices, but above all focus on the customers and their needs. The change approach was one of top down but emergent as different opportunities presented themselves over the course of a number of years.

The primary school

The primary school had clear internal and external drivers for change in that, although performing satisfactorily, there was a real danger of becoming complacent and performance easing off. These drivers for change, the appointment of a new head with new ideas and the parents' successful campaign to get a new school all helped shape the nature and the direction of change.

The head began to address the current state of the school as part of the health of the whole community system. By seeing the school as one subsystem of the community she realized that all stakeholders needed to contribute towards its overarching vision and development.

The orientation of the school therefore was conducted with strong visionary leadership from the head but tapping into the communities of interest; a vision and values-making process involving all stakeholders; and continuing to focus on business as usual as well.

The financial services company

Through a process of diversifying some of its saving and lending functions and through the acquisition of a number of smaller businesses, the financial services company had developed a transition vision that it would 'transform itself from a traditional bank into a group of confident, successful and specialist financial services businesses'.

The increases in the scope, scale and complexity of its activities had led to the need to restructure into a clearly defined group of businesses.

It was envisaged that the new group structure would better enable the bank to achieve its strategic aims in three key ways:

1. The new group structure would facilitate the management of an expanding group of distinctive businesses. It would enable the acquisition and management of a number of separate business units with minimal disruption to other parts of the group.

2. The development of distinctive business units within new group structure would enhance individual business unit competitiveness. This would result from increased focus and commitment from all business unit management and staff to the delivery of the business unit customer propositions and achievement of competitive advantage.

3. In addition to improving the effectiveness of the management of the group business activities, the new group structure would facilitate the effective management by the group CEO of the relationship with its overseas parent and other relevant external relationships (Bank of England, the City, etc).

Aster Group

Introduction

The Aster Group is a thriving group of companies providing homes and housing-related services in central Southern and South West England. The Group has assets of over £420 million, annual turnover of over £65 million and employs over 680 staff. The operating companies own and manage over 15,000 homes and provide services to over 40,000 people.

Aster Group is one of the Housing Corporation's Lead Investors and provides development agency services to other organizations and the New Futures partnership of regional and specialist housing associations.

Aster Group operating companies have a substantial degree of operational independence but work closely together to gain maximum benefit from their combined strength and resources.

Residents and other clients play a strong role in influencing the operation, and surveys show that Aster enjoys high rates of satisfaction with the services it delivers, with around 90 per cent of tenants saying that they are very or fairly satisfied with their landlord.

The strong growth over the last three years was recognized in 2006 when Aster Group was given the 'Beacon Company' award by the South West Regional Development Agency. It is the first housing association, and one of just a few not-forprofit organizations, to have been given this award, which 'brings together some of the South West's most forward thinking and ambitious companies to promote success and spearhead the growth of the region'. This status is given to companies that can demonstrate outstanding achievement across a range of criteria. In Aster's case the rapid growth and influence of the Group was a factor in its nomination. Other companies can turn to Beacon Companies for examples of leadership and business performance.

Housing Corporation Assessment for Aster Group

Viable

The Group meets the expectations set out in the Regulatory Code in terms of financial viability.

Properly governed

The governing body gives effective leadership and control, has a wide range of skills and experience and, supported by appropriate governance and executive arrangements, is improving its own performance and that of the organization.

Properly managed

The Group generally meets the standard expected given the context in which it works and the available resources.

Development

The association demonstrates a good performance by achieving or exceeding its annual targets, maintaining good progress against targets during the year and delivering quality housing that meets our standards.

(Housing Corporation's assessment, June 2006, http: //www. housingcorp .gov.uk/)

History culture, orientation

The Aster Group's history can be traced back over a decade when Sarsen Housing Association was born out of a housing stock transfer from the Local Authority. The Local Authority Director of Housing became the new Chief Executive and a board was set up comprising four tenants, three representatives from the Council and eight independent people from the business and community.

For five years the Association focused on delivering on its original promise of improving homes to modern standards whilst keeping rents stable. Sarsen was efficient and effective in its operation. As a result it was able to begin to generate revenue surpluses in 2004, three years earlier than envisaged in the original plan. Both the board and the management then realized that they needed to develop their strategy further.

The board and the Chief Executive quickly became more entrepreneurial and began to seek out opportunities for growth and development. So, for example, during 1997 they began new initiatives - 'care and repair' for elderly people, developing new homes outside their original base and putting their toe in the water of market renting being just three. This was evolutionary change but they were beginning to be more confident of their capabilities and began to ask the more strategic question of where they might go from here.

Aster was 110th in the league table of housing associations, with 5,000 housing units. A relatively medium-sized association, to be in the top 50 it would have to grow to 10,000 units.

Sadly the Chief Executive died suddenly in November 2001, sending a shockwave through the organization. The new Chair, John Heffer, had been in place just a week. Appointing an interim Chief Executive from in-house Aster began to look for someone to lead it who was entrepreneurial, pacesetting, had a track record but who would work with its values and its staff.

One of those short-listed - Richard Kitson - wanted to know from his side whether Sarsen was ambitious, keen, prepared to take calculated risks and adventurous. A match had been made.

Richard had experience within the public sector - leading and growing a local authority housing service, and within the housing association world - managing the fastest-growing region of a well respected national association with a long history of success, including managing large numbers of staff in an operation that was noted for its efficiency and its substantial development. He also had prior industry credibility as the President of the Chartered Institute of Housing.

Sarsen entered its second transition period as it moved further away from the local authority world, shedding a rather bureaucratic culture. One of the first tasks was to create a group structure to facilitate the growth that was the emerging strategic theme. One or two senior people left, of their own accord, and this provided the opportunity to recruit senior people with an ethos of not only delivering a stable high quality housing service but also those with an eye on proactivity, seizing development opportunities and the continuous improvement of existing services together with a move towards creating innovative new products and services.

The organization turned more outward, making connections, using its networks to get business, establishing a reputation with its stakeholders and attracting new blood into the organization.

A formal new group structure was created in the autumn of 2003 and a new top team was formed with new teams underneath them. Silbury Group had been launched.

An important focus was to increase the capacity and capability across the organization. This required shifting the culture away from the traditional local government mindset. New members were recruited to the Group board, which became a blend of the old and the new, and a management development programme was launched for the top 30 managers. Individual managers and groups of staff were asked what the key organizational issues were and this in turn informed the design of the development programme.

A theme throughout this period was the relative stability of the board. There was a clear demarcation between executive management functions (the management team) and the governance (the board) and working relationships were always excellent. The board did change over time as the Group grew. It had to cope with governance issues over an ever increasing range of activities - hence one of the reasons to adopt a group structure, which enabled the different companies to be managed and have effective governance. And of course the board sought to get the requisite variety of people onto it with a mix of skills appropriate to the businesses being overseen. Interestingly the board was not committed to growth for growth's sake. In John's words, 'We are not bothered about being big but about being the best, and if growth can add to economies of scale and synergies then so much the better.'

Drivers for change

There were a number of internal and external drivers for change:

* the continuing shift away from a local authority culture to one of an autonomous not-for-profit business;

* the untimely death of the Chief Executive and consequential re-evaluation of strategy and need to appoint a new chief executive;

* the Housing Association world continuing to grow with the creation of organizations receiving the housing stock of local authorities, a particular feature of South East and South West England. This change was significantly increasing competition in the sector;

* a continuing housing crisis in the UK with house prices increasing dramatically year on year and not enough new homes being built to satisfy demand;

* migration of older people to the South and South West of the country looking to retire with affordable housing but also the necessary services for their population group; and

* a pivotal event was the Housing Corporation's decision to restrict the number of associations it did business with.

Rather than invest in over 350 separate organizations it decided to restrict itself to investing in around 70. Silbury had been 1 1 0th in the league so therefore needed to redouble its efforts to grow. A number of growth strategies were considered but two seemed to be paramount - the development team had been acquiring land and building new homes and was continuing to prove successful at that. But the board also began to think in terms of partnering, mergers or acquisition. They considered a number of associations informally but there were obvious reasons for not moving ahead - too different geographies, unaligned systems and processes and strategies, and different world views. However they became a preferred partner in their own right, scraping in at number 69 out of 71.

The Role of the Housing Corporation

The Housing Corporation is responsible for investing public money in housing associations which are registered with the Corporation (legally known as Registered Social Landlords) to provide homes that meet the needs set out in local and regional strategiesand, through regulation, for protecting that investment and ensuring that it provides decent homes and services for residents... to encourage innovation and good practice and to promote improved performance.

The growth agenda had been set and they started actively to seek out potential partners. They already had links with one similar sized organization and both Chief Executives, Board Chairs and Vice-Chairs had a number of informal meetings to see if there was a match. All were keen on exploring each other's philosophies and the degree of compatibility. This wasn't just six people, it was who they represented. The informal meetings became formal and then there was widespread consultation with all stakeholders - especially tenants' representatives and staff. Testway - the other association - set 20 criteria for the selection of a merger partner.

The two Chief Executives realized they needed to acknowledge that there would be winners and losers from individuals' and different teams' perspectives. This led to some tricky but open discussions - 'let's think about this and come up with an acceptable formula'.

They also agreed that a group structure would work best with a continuing fair degree of autonomy for individual businesses. All key players were involved and those people most likely affected were engaged.

As the grouping became more and more likely the meetings of necessity became more formal, but from the inception of the idea staff in both organizations were given full updates and asked to contribute their views. Managers recognized the need to disseminate information and build confidence throughout the new Group. So, when in April 2005 the grouping happened it seemed that no one really noticed - it was effected with the minimal degree of disruption. The Aster Group had taken off.

Following the successful grouping the board were becoming more and more comfortable with the decisions of the Chief Executive and fully supported him when, for example, he formed a working partnership with a black and minority ethnic housing association in an urban area - away from Aster's heartland. He also pushed for becoming one of the four strategic partners in an important sub-regional configuration of urban local authorities. Aster was bidding against national and established competition but was short-listed and successful, being described as coming with ? fresh approach and a good team'. Currently it is a major player in the region and another housing association has since joined the Group.