Change management principles and practices

Change Management & Organizational Transformation

CHANGE Management and ORGANIZATIONAL TRANSFORMATION

The objective of this work is to examine changes in organizations, management and how management and technology are more frequently becoming factors for consideration. This work will select a company and analyze the status of organizational transformation and change management, and identify key organizational transformation and change management issues currently facing the organization, providing recommendations as to how the company should address these change management issues. Selected for the purpose of this study are Federal U.S. Agencies and the Organizational Transformation initiative reported by the Government Accounting Office and specifically relating to the implementation of Chief Operating Officer/Chief Management Officer Positions in Federal Agencies.

INTRODUCTION

It was reported in 2007 in the report GAO-08-34, a report to the Subcommittee on Oversight of Government Management, the Federal Workforce and the District of Columbia, Committee on Homeland Security and Governmental Affairs, U.S. Senate that agencies across the federal government were in the process of "embarking on large-scale organizational transformation to address 21st century challenges..." And that one proposed approach for addressing systemic federal government and management challenges involved "the creation of a senior-level position -- a chief operating officer (COO)/chief management officer (CMO) -- in selected federal agencies to help elevate, integrate, and institutionalize responsibility for key management functions and business transformation efforts. GAO was asked to develop criteria and strategies for establishing and implementing COO/CMO positions in federal agencies." (GAO, 2007)

Toward this end the GAO:

(1) Gathered information on the experiences and views of officials at four organizations with COO/CMO-type positions and (2) Convened a forum to gather insights from individuals with experience in business transformation. (GAO, 2007)

It is related that each agency has "its own set of characteristics, challenges and opportunities" therefore the determination of an approach should be specifically "within the context of the agency's specific facts and circumstances." (GAO, 2007)

DEFINITIONS of TERMS

CAO: chief acquisition officer

CFO: chief financial officer

CHCO: chief human capital officer

CIO: chief information officer

CMO: chief management officer

COO: chief operating officer

DHS: Department of Homeland Security

DOD: Department of Defense

FAA: Federal Aviation Administration

IRS: Internal Revenue Service

MIT: Massachusetts Institute of Technology

OMB: Office of Management and Budget

OPM: Office of Personnel Management

PBO: performance-based organization

PMA: President's Management Agenda

SES: Senior Executive Service (GAO, 2007)

I. BACKGROUND of the STUDY

Change management has evolved over the last century beginning with early works such as Arnold Van Gennep (1907) entitled "The Rites of Passage" and Kurt Lewin (1947) entitled: "Resolving Social Conflict & Field Theory in Social Science" as well as the work of William Bridges (1979) entitled: "Transitions" which explored how change was experienced by individuals. Over the past few years change management has been emergent and a requirement for organizational transformation initiatives and in fact, change management has become a business discipline that is acknowledged for successfully implementing changes. Changes occur in all industries whether the organization is publicly or privately owned. Trends in change management for 2009 include the following stated trends:

1. A greater recognition of the need for change management

2. Change management competency building

3. Dedication of resources for change management

4. Use of methodology and tools

5. Application on projects

6. Integration with project management

7. Change saturation

8. Standard change management approach

9. Establishment of a change management group

10. Management of the portfolio of change. (the Change Management Learning Center, 2009)

II. IDENTIFICATION of CHANGE Management ISSUES

Change management issues at focus in this specific study include those as follows:

Greater recognition of the need for change management;

More structured and formal processes

Better understanding of what change management really is;

Integration with project management;

Recognition of change management as a new competency;

Creation of formal job roles and titles;

Earlier application on projects. (the Change Management Learning Center, 2009)

However, even with the noted difference in both 2007 and 2009 there was a "greater recognition of the need for change management" which has moved "from a 'nice to have' to a 'must have' for major organizational change." (the Change Management Learning Center, 2009)

Reasons that change management has been emergent over the past ten years include the following stated reasons:

1. New value systems

2. Legacy of past failures

3. Velocity of change

4. Structure and formalization of change management. (the Change Management Learning Center, 2009)

III. ANALYSIS

The work of Welbourne (1995) entitled: "Fear: The Misunderstood Component of Organizational Transformation" states that corporate transformations "are now being implemented by many organizations; however, successes are remarkably rare. A contributing factor might be the ineffective use of fear in employees' communications."

Welbourne states that organizations should "enhance the transformation process by harnessing fear to quickly change behavior." (1995)

Welbourne states that protection motivation theory has been applied by marketing researchers to suggest that fear appeals containing strong threats and information on coping strategies can be successful in changing behavior." (1995)

The work of Poole, and Van de Ven (2004)

entitled: "Handbook of Organizational Change and Innovation" states that "many scholars in many disciplines have sought to explain how and why organizations change and innovate." Change is stated to be defined as "...a difference in form, quality, or state over time in an organizational entity." (Poole and Van de Ven, 2004)

Furthermore, "change can take many forms; it can be planned or unplanned, incremental or radical, and recurrent or unprecedented. Trends in the process or sequence of changes can be observed over time. These trends can be accelerating or decelerating in time and they can move toward equilibrium, oscillation, chaos, or randomness in the behavior of the organizational entity being examined." (Poole, and Van de Ven, 2004)

Therefore, it is stated that the basic concept of organization change involves three ideas. Those three ideas are stated as:

(1) Difference;

(2) at different temporal moments; and (3) Between states of an organizational unit or system. (Poole, and Van de Ven, 2004)

The GAO report states that there are five criteria upon which there could be several types of COO/CMO positions developed and which include those as follows:

(1) the existing deputy position could carry out the integration and business transformation role -- this type of COO/CMO might be appropriate in a relatively stable or small organization;

(2) a senior-level executive who reports to the deputy, such as a principal under secretary for management, could be designated to integrate key management functions and lead business transformation efforts in the agency -- this type of COO/CMO might be appropriate for a larger organization; and (3) a second deputy position could be created to bring strong focus to the integration and business transformation of the agency -- this might be the most appropriate type of COO/CMO for a large and complex organization undergoing a significant transformation to reform long-standing management problems. (GAO, 2007)

Stated as key strategies for the implementation of the COO/CMO positions are those in the following table labeled Figure 1 in this study.

Figure 1

Key Strategies for Implementation of COO/CMO Positions

Source: (GAO, 2007)

The guidelines for the development and implementation of COO/CMO positions in Federal Agencies and MHS Pre-Certification Authority Designation are reported in the work entitled: "Defense Business Transformation (DBT) Update" and the following facts are stated in the comptroller, David M. Walker's testimony:

(1) as agencies across the federal government embark on large-scale organizational change needed to address 21st century challenges, there is a compelling need for leadership to provide the continuing, focused attention essential to completing these multiyear business-related transformations.

(2) at the same time, many agencies are suffering from a range of long-standing management problems that are undermining their ability to efficiently, economically, and effectively accomplish their missions and achieve results.

(3) New leadership models are needed to help elevate, integrate, and institutionalize these business transformation and management reform efforts. (Dejewski, 2007)

The GAO is stated to have studied organizations with COO/CMO positions to develop guidance/best practices for implementation. Information was gathered by the GAO on the "experiences and view of officials at four organizations with COO/CMO-type positions in place:

(1) Department of the Treasury;

(2) Internal Revenue Services;

(3) Department of Justice; and (4) Massachusetts Institute of Technology. (GAO, 2008)

The GAO is stated to have convened a forum on April 24, 2007, for the purpose of gaining insights from those who had experience and expertise in the transformation of business as well as in federal and private sector management and most specifically change management. (Dejewski, 2007)

It is reported that since each agency has its "own set of characteristics, challenges and opportunities, the type of COO/CMO to be established in a federal agency should be determined within the context of the specific facts and circumstances surrounding that agency." (GAO, 2008)

The criteria stated for use in determining the type of COO/CMO position for an agency:

(1) History of organizational performance;

(2) Degree of organizational change needed;

(3) Nature and complexity of mission;

(4) Organizational size and structure; and (5) Current leadership talent and focus. (GAO, 2008)

These criteria are stated to "inform many other elements of the positions, including roles and responsibilities, job qualifications, reporting relationships, and decision-making structure and processes." (Dejewski, 2007)

Three types of COO/CMO positions were identified as follows:

(1) the existing deputy position could carry out the integration and business transformation role. This type of COO/CMO might be appropriate in a relatively stable or small organization;

(2) a senior-level executive who reports to the deputy, such as a principle undersecretary for management could be designated to integrate key management functions and lead business transformation efforts in the agency. This type of COO/CMO might be appropriate for a larger organization;

(3) a second deputy position could be created to bring strong focus to the integration and business transformation of the agency, while the other deputy position would be responsible for leading the operational policy and mission-related functions of the agency. For a large and complex organization undergoing a significant transformation to reform longstanding management problems, this might be the most appropriate type of COO/CMO. (Dejewski, 2007)

Stated as GAO recommended considerations in regards to the criteria and strategies for development of COO/CMO positions in major federal agencies are those stated as follows:

(1) the GAO has long advocated that DOD and DHS could benefit from a senior level COO/CMO position, with a term appointment of at least 5 to 7 years, and a performance agreement. GAO continues to identify DOD's approach to business transformation and implementing and transforming DHS on GAO's biennial high risk list of programs. DOD dominates GAO's list of agencies with high-risk programs designated as vulnerable to waste, fraud, and abuse of funds, bearing responsibility, in whole or in part, for 15 of 27 high-risk areas;

(2) as Congress considers COO/CMO positions for federal agencies, the criteria and strategies identified should help to highlight key issues that need to be considered, both in design of the positions and in implementation; and (3) While Congress is currently focused on two of the most challenging agencies -- DOD and DHS -- the problems they face are, to varying degrees, shared by the rest of the federal government. Each agency, therefore, should consider the type of COO/CMO that would be appropriate for its organization, either by designating an existing position as the COO/CMO or creating a new position, and adopt the strategies we outline to implement such a position. (Dejewski, 2007)

The following illustration shows the implementation timeline in the initiative of MHS Pre-Certification Authority Designation.

Figure 2

Implementation Timeline

Source: Dejewski (2007)

Organizational changes and transformation such as these which are being reported to have been implemented by and within the defense branches of the federal government are only part of the continuous and ongoing changes required in the organization for example the work published by the Medical Group Management Association of Greater St. Louis entitled: 'Organizational Transformation: The Dynamics of Change states that organizations are required to "continually reinvent themselves in response to an ever changing and continuously more complex environment. This presentation offers insight on the dynamics of change through organizational transformation. There are two approaches to change management, namely, reactive and proactive." (nd)

It is stated in the testimony of the Comptroller David M. Walker that a department-wide information technology (it) governance framework -- including controls (disciplines) aimed at effective management of it-related "people, processes and tools is vital to DHS's transformation efforts." (Walker, 2007) Inclusive in these controls and disciplines are the following:

(1) having and using an enterprise architecture, or corporate blueprint, as an authoritative frame of reference to guide and constrain it investments;

(2) defining and following a corporate process for informed decision making by senior leadership about competing it investment options;

(3) applying system and software development and acquisition discipline and rigor when defining, designing, developing, testing, deploying, and maintaining systems;

(4) establishing a comprehensive information security program to protect its information and systems;

(5) having sufficient people with the right knowledge, skills, and abilities to execute each of these areas now and in the future; and (6) centralizing leadership for extending these disciplines throughout the organization with an empowered Chief Information Officer. (Walker, 2007)

Walker states in his testimony that the Department of Homeland Security has progressed somewhat in the transformation of its human capital systems but that however, much more work remains to be done.

Stated to be the most pressing of all challenges related to human capital are those as follows: (1) successfully completing its ongoing transformation; (2) forging a unified results-oriented culture across the department (line of sight); (3) linking daily operations to strategic outcomes; (4) rewarding individuals based on individual, team, unit, and organizational results; (5) obtaining, developing, providing incentives to, and retaining needed talent; and most importantly, (6) leadership at the top, to include a chief operating officer or chief management officer. (Walker, 2007)

The problem that is stated to be most urgent is the low morale of employees and the Department of Homeland Security is stated to score "at the bottom or near the bottom of all federal agencies in the four areas which provide the standards of success for agencies to measure their progress." (Walker, 2007)

Furthermore, there is a critical need for organization of it leadership and responsibilities as well as for the initiation of strategic planning for it human capital. Strategic human capital management is stated to be "...the centerpiece e of any transformation effort." (Walker, 2007)

DHS is reported to have finalized "its human capital regulations and it is vital that DHS implement its human capital system effectively." (Walker, 2007)

DHS is reported to have identified five department priorities including those of:

(1) hiring and retaining a talented and diverse workforce;

(2) creating a DHS-wide culture of performance;

(3) creating high-quality learning and development programs for DHS employees, implementing a DHS-wide integrated leadership system;

(4) and being a model of human capital service excellence. (Walker, 2007)

Still needed are efforts on the part of DHS to:

(1) create a clearer crosswalk between departmental training goals and objectives and DHS's broader organizational and human capital goals, and (2) develop appropriate training performance measures and targets for goals and strategies identified in its department-wide strategic training plan. (Walker, 2007)

Recommendations have been made for specific program offices and organizational entities for the purpose of ensuring that "...human capital resources are provided to improve the effectiveness of management capabilities, and that human capital plans are developed that clearly describe how these components will recruit, train, and retain staff to meet their growing demands as they expand and implement new program elements." (Walker, 2007)

Policy decisions have slowed down the creation of a unification acquisition organization and it was reported that the management directive 'Acquisition Line of Business Integration and Management" which emphasized the "need for a unified, integrated acquisition organization, relies on a system of dual accountability between the chief procurement officer and the heads of the departments to make this happen.16 This situation has created ambiguity about who is accountable for acquisition decisions." (Walker, 2007)

Further stated are findings that DHS acquisition organizations in DHS "are operating in a disparate manner, with oversight of acquisition activities left primarily up to each individual component." (Walker, 2007)

Those components were stated to be as follows:

(1) Components exempted from the unified acquisition organization,

(2) the chief procurement officer had insufficient staff for department-wide oversight, and (3) Staffing shortages led the office of procurement operations to rely extensively on outside agencies for contracting support. (Walker, 2007)

The McKinsey Quarterly reported in August 2008 in the work entitled: "Creating Organizational Transformations: McKinsey Global Survey Results" that there is a need for organizations to constantly change and for many reasons but that achievement of a "true step change in performance is rare." (McKinsey Quarterly, 2008)

In fact, a recent McKinsey survey of executives worldwide relates that only "one-third say that their organizations succeeded in doing so." (McKinsey Quarterly, 2008)

The McKinsey survey revealed that there are various goals at focus in organizational change and transformation. The following responses were provided by executives responding to the survey conducted by McKinsey:

Question: What overall objective, if any, was your company trying to reach with its transformation?

Moving from good performance to great performance

35%

Reducing costs

15%

Turning around a crisis situation

12%

Completing or integrating a merger

12%

Expanding geographically

9%

Splitting up or divesting part of the organization

4%

Preparing for privatization or market liberalization

2%

Other

7%

I have not experienced a significant transformation in the last five years.

5% McKinsey Quarterly, 2008)

It is important for the purpose of this study to emphasize that the GAO report acknowledges power vested in the COO/CMO created position in federal agencies and this is stated in the GAO report (2007) as follows:

The case-study officials and the forum participants broadly recognized that a COO/CMO should have a high enough level of authority to ensure the successful implementation of functional management and transformational change efforts in the agency. However, the officials and participants had mixed views as to the most appropriate organizational level for a COO/CMO position." (GAO, 2007)

According to the GAO report it is important to "Ensure that the COO/CMO has a high level of authority and clearly delineated reporting relationships." (GAO, 2007) Requirements of this initiative include those stated as follows:

(1) Foster good executive-level working relationships for maximum effectiveness;

(2) Establish integration and transformation structures and processes in addition to the COO/CMO position;

(3) Promote individual accountability and performance through specific job qualifications and effective performance management;

(4) Provide for continuity of leadership in the COO/CMO position;

(5) Elevate attention on management issues and transformational change;

(6) Integrate various key management and transformation efforts;

(7) Institutionalize accountability for addressing management issues and leading transformational change. (GAO, 2007)

The figure as follows shows the 'reporting relationships for the COO/CMO Position in Four Case-Study Organizations.

Figure

3

Reporting relationships for the COO/CMO Position in Four Case-Study Organizations

Source:

It is reported in the GAO report that the following criteria assisted in the determination of what type of COO/CMO were the right type for each office:

(1) history of organizational performance, such as the existence of longstanding management weaknesses and the failure rates of major projects or initiatives;

(2) degree of organizational change needed, such as the status of ongoing major transformational efforts and the challenge of reorganizing and integrating disparate organizational units or cultures;

(3) nature and complexity of mission, such as the range, risk, and scope of the agency's mission;

(4) organizational size and structure, such as the number of employees, geographic dispersion of field offices, number of management layers, types of reporting relationships, and degree of centralization of decision making; and (5) current leadership talent and focus, such as the extent of knowledge and the level of focus of the agency's managers on management functions and change initiatives, and the number of political appointees in key positions. (GAO, 2007)

The role of the COO/CMO include but is not limited to "responsibility for human capital, financial management, information resources management, and acquisition management as well as other management functions in the agency, such as strategic planning, program evaluation, facilities and installations, or safety and security..." (GAO, 2007) the COO/CMO is further a leader of "business transformation in the organization." (GAO, 2007)

It is critical that it is clear "which major change efforts are the direct responsibilities of the COO/CMO." (GAO, 2007) it is specifically stated in this report of the management in some federal agencies that they are highly "...entrenched and long-standing, and it can take at least 5 to 7 years of sustained attention and continuity to fully implement transformations and change management initiatives." (GAO, 2007) in fact, it is just agencies such as those fore-mentioned, or those who are high-risk operationally and functionally that would prove to be "good candidates for establishing a COO/CMO-type position.

It is related as well that organization size has been cited frequently as "an important factor to consider when reviewing the COO/CMO position." (GAO, 2007) Stated for example is the statement of a case-study official that a "COO/CMO position would not be necessary in an organization with only 50 people whereas an organization with 2,000 employees could need such a position to oversee and integrate the management functions." (GAO, 2007) the larger organizations are stated to be more in need of "coordinating structures to help with integration and coordination because communication can easily break down." (GAO, 2007)

In the area of current talent and focus it is stated that consideration of focus and attention is needed on the "extent of knowledge...of existing senior leadership." (GAO, 2007) an agency official stated in an interview that lacking is "sufficient attention and focus on management issues to accomplish the mission of the organization then establishing a COO/CMO position would add value." (GAO, 2007) Another official interviewed stated that it was necessary to consider "the extent to which the agency has a large number of non-career positions (e.g., political appointees) carrying out management roles." (GAO, 2007)

The work of 'Organizational Transformation: Approaches, Strategies, Theories' states that second-order changes, unlike first-order changes "involve two fronts of strong resistance. The first is within the organization; the second is without." (Levi and Merry, 1986)

If the change is too radical and the system "vastly different from its domain, it threatens its environment and generates strong resistance." (Levi and Merry, 1986)

It is noted that in the case studies reviewed in the work of Levy and Merry that "it is easier to transform organizations by creating a new system or a new unit for which new personnel are recruited and trained, than to renew existing systems." (Levi and Merry, 1986)