Latham’s Enrichment of the formula that I have most used in my life for leading change

Dr. Ron Koller is mentioned. He is one of my closest partners. Ron’s latest research will be in my Fourth Edition.

Leading Change Formula Revisted

mathematical formulasThis week I am revisiting my old blog post titled “Beckhard’s Change Formula – D x V x FS x B > R” to update it with some recent research and set the record straight regarding credit for the change formula. A friend of mine,Dr. Chad McAllister, frequently shares a link to my old post with his graduate class. One of his students recently questioned the post and suggested that I, and others, had given too much credit to Beckhard for this formula. Upon further review, I learned from Ron Koller that the earlier first edition of the reference that I cited (Beckhard & Harris, 1987) actually gives credit to another person as the original source for the formula. Beckhard and Harris (1977) and Beckhard (1975) attribute the formula to David Gleicher of Arthur D. Little who created a version of the formula in the 1960s. The formula was later revised by Dannemiller and Jacobs (1992) to D x V x F > R. For more on the origin and development of the formula see Koller’s posts Part 1 and Part 2. It appears many of us may have given too much credit to Beckhard for the formula. In fact, I have been calling it the “Beckhard formula” for over fifteen years.

So, it seems that Gleicher may be the origin of the original version of the formula. Then Beckhard (1975) and Beckhard and Harris (1977 and 1987) took it and advanced it further by adding some theoretical underpinnings and explanations. Finally, Dannemiller and Jacobs simplified it and made if even more useful for management. And useful it is! I first learned about the change formula from Sandra Mobleyin the late 90’s and have used it in a wide variety of situations and contexts to help senior leaders examine stalled change initiatives and proactively plan for successful change initiatives. So, in the end, it might be the Gleicher, Beckhard, Harris, Dannemiller, and Jacobs Change Formula. If I left anyone out – please forgive.

Dissatisfaction with Status Quo x Compelling Vision x First Steps x Believability > Resistance to Change

Research and practice suggest that most change initiatives fail. Estimates vary but most suggest that 70-80% of change initiatives fail to achieve the stated objectives. The message is clear – the odds are against you! Forces and facilitators of changes are essential components of successful organization transformation (Latham, 2013). The change formula proposes that the force of the dissatisfaction with the status quo combined with the forces of a compelling vision, first steps, and believability, all have to be greater than the resistance to change. The fist two variables combine to provide the primary forcing function for change. The dissatisfaction pushes the individuals to change but does not provide a direction. They know they are not happy but don’t know how to make it better. The vision pulls the individuals to change and provides a direction for change. Why don’t we like the current system or situation? What will the new system or situation do for us? The change formula concepts are embedded in many of the leading transformation frameworkcomponents.

Dissatisfaction with Status Quo

Dissatisfaction is a key factor in motivating people to change but is limited in that it does not provide any direction. In other words, they know they are unhappy but don’t know what to do about it. For organizations that are not performing well this can be what many have called a “burning platform.” When the platform is burning you know you need to get off so that you don’t get burned – but which direction should you jump? Successful organizations, on the other hand, are often very satisfied with their performance and can even become a bit arrogant. Kotter and Heskett (1992) describe Xerox of the 1970s as an “extreme” example of this pattern. Xerox’s lack of response to Japanese competition in the copier market resulted in a situation where, in 1980 the Japanese were selling copiers in the United States for what it cost Xerox to make them (p. 77). This eventually led to a market share loss from 82% in 1976 to 41% in 1982 (p. 77). Arrogance can lead to a culture where negative feedback is not accepted. Kroll, Toombs, and Wright (2000) identify Napoleon’s inability to accept feedback from his leadership team and as a key reason for the tragic failure of his March to Moscow and the loss of over 380,000 lives.

How can you increase the level of dissatisfaction with the status quo in an organization before you lose market share? In other words how can you prevent the “burning platform.” In the words of baseball legend Casey Stengel, “If we’re going to win the pennant, we’ve got to start thinking we’re not as good as we think we are.” There are at least three techniques that have proven useful: comparison of performance results to others, feedback from stakeholders, and organization assessment. These approaches are all part of the leadership system component of the leading transformation framework. Comparison of your organization’s performance relative to other organizations is a good way to understand what is possible and where your organization stands relative to that level. Feedback from stakeholders including customers, employees, investors, and partners can increase dissatisfaction if the feedback is accepted as credible and thought of as a “gift” as opposed to a nuisance. Finally, assessment using a model or standard is another way to identify opportunities for improvement that might not emerge from comparison to others or feedback from stakeholders.

Compelling Vision

A vision is a picture of the ideal organization, information system, supply chain, so on and so forth. The vision pulls people to change and provides direction for the change. According to Senge (1990) “creative tension” is created by the dissonance between the current situation and the vision. According to Belasco (1990) successful visions meet three criteria – they are timeless, inspirational, and provide clear guidelines for decision making (p. 99). Ideally a vision provides guidelines for decision making in situations not covered by the corporate policy manual. I find that most important decisions are not covered by the typical policy manual. In addition, “for a vision to be successful, it must empower. Empowerment is a combination of motivation to act, authority to do the job, and the enablement to get it done. Enablement requires a vivid picture of the destination” (Latham, 1995). A vision is a key element of the compelling directive component of the leadership system.

The three content components of the ideal organization vision are product or service, culture, and people. A vision should provide a picture of the ideal products and services or the value that the organization will create for the world. Ideally, a vision also provides a description of the desired culture as expressed in values, norms, symbols, etc. Finally, a vision should also include the individuals in the organization – what it is like to work for the company? Quinn (1996) calls this the “what of change, the we of change, and the I of change.” According to Deming (1986) what makes a vision the key to success is that it drives an organization’s goals and objectives, which, in turn, direct all plans and activities to a specific end, enabling the organization to maintain a constancy of purpose (p. 24). Covey (1989) proposed that everything is created twice: first in the mind, then in the physical world. To create your vision in the physical world, you need a well-thought-out, flexible plan to guide your efforts.

First Steps

It is one thing to know that you are dissatisfied with the way things currently are and have a dream of a better world; it is quite another to know what to do about it. It is seldom that we know all the required steps to accomplish a transformation in advance but it is important to have a good idea what the first steps will be. A high level project plan with the major activities, deliverables, and benefits can help increase the motivation to change. The tension created by the Dissatisfaction and the Compelling Vision can create paralysis if there is not a credible path to actually achieve the new vision. Beckhard and Harris (1987) call this the “practicality of the change.” Many of the specific steps will be figured out along the way as the iterative path unfolds. These first steps vary depending on whether the situation is an organization transformation or simply a new ERP system.

For an organization transformation the first steps might be: clear priorities, goals and objectives, a portfolio of initiatives, and a communication plan. All key elements of a effective leadership system. Change often comes down to individual change initiatives like a new facility, accounting system, or a major process redesign. The key factors for managing any project or initiative are schedule, scope, cost and quality or performance. Schedule, scope, and cost together determine the quality or performance of the final deliverable. Regardless of the type of change, organization transformation or a single initiative, the action plan should address at least three related components or what Quinn (1996) calls the what of change, the we of change, and the I of change.

Finally, while priorities and clear objectives at the top are critical to successful change, the initiatives that support these objectives must be a priority on the agendas of regularly scheduled and frequent senior management forums to ensure actual implementation. A management review process is a formal “follow through” process that provides for senior executive review and revision of key initiatives to keep the transformation on track and ensure that it is achieving the desired results. In the end, this package (content and process) of priorities, initiatives, and management review and refinement all have to make sense in order to be believable. If it is not believable it will not generate enough motivating force to overcome the inertia or resistance to change. The development and deployment of strategy are key components in a larger leadership system. However, the best laid plans will not result in change if leadership is not credible.

Believability

The first three variables must form a believable “package” that is supported by credible leadership – words and deeds. A vision and a plan without resources is just a fantasy. The combination of dissatisfaction with the status quo, a compelling vision, and first steps (plan of action) must be believable to create sufficient force to overcome the inertia resisting change. There are three key elements to believability or credibility: alignment and integration, sustainability, and logic (cause-and-effect).

Alignment and integration is the degree to which the dissatisfaction, vision, and the first steps are consistent and working together. There are fours key elements that must be aligned and integrated for any major change effort to succeed: stakeholder needs, strategy (goals and objectives), the performance measures (scorecard), and the action plans along with resources. Alignment is one of five key forces and facilitators of change in theleading transformation framework.

Sustainability is the degree to which the change will actually become institutionalized and remain effective in the future. Sustainability has several components but one of the most important is the degree to which the changes produce value for multiple stakeholders. Stakeholders include: investors, customers, employees, suppliers and partners, and the public and local communities. If one or more of these groups is short changed by the changes then they will work against the change and undermine your efforts.

Logical (Action = Results) is the degree to which the actions or first steps make sense given the gap between dissatisfaction and vision. This requires a “systems perspective” of the organization. A system perspective includes an understanding of the cause-and-effect relationships within the organization. For example, an organization might determine that an investment customer service employee training will result in improved customer service which, in turn, will result in repeat business and referrals and ultimately increased revenue.

For example, if you were running a non-profit charitable organization and were dissatisfied with the decreasing amount of donors contributions – what would you do? To create a believable approach you would first have to understand the donor’s needs, wants, and desires and the nature of their dissatisfaction. Second, you would need to understand the donor’s vision – what do they want to accomplish. Finally, you would need to determine how the organization should change to create significance for the donor. While a believable package of D x V x FS x B will contribute to increasing the force for change, if any one of the variables is zero the product of that side of the formula will be zero. Every time I have used this formula to diagnose a stalled change initiative, one or more of the variables on the left side of the formula was zero or near zero.

Resistance to Change

The product of these first four variables must combine and be greater than the resistance to change. In addition to increasing the variables on the left side of the formula you can also work on reducing the resistance variable on the right side of the formula. Few people like change, but we like change that is imposed on us the least. At the same time that organizations work on increasing the variables on left side of the equation they also work on reducing the variable on the right. This is often accomplished by involving the people in designing the change. Beckhard calls this the “cost of change.” If you are dealing with a change initiative that has stalled – chances are one or more of the variables in this formula is the problem. Theleadership style of the CEOs in my research was characterized by respect for all people and a collaborative approach to developing and deploying strategy all of which helped to reduce the resistance to change.

I hope you have found this updated version of my take on the change formula useful. What are your experiences with leading change?

References

Beckhard, R. (1975). Strategies for large system change. Sloan Management Review, 16(2), 43-55.

Beckhard, R., & Harris, R. (1977). Organizational transitions: Managing complex change (1st ed.). Reading, MA: Addison-Wesley Publishing.

Beckhard, R. & Harris, R. (1987). Organizational transitions: Managing complex change (2nd ed.) Reading, MA: Addison-Wesley Publishing.

Belasco, J. (1990). Teaching the elephant to dance. New York: Crown Publishers.

Covey, S. (1989). The 7 habits of highly effective people. New York: Simon & Schuster.

Dannemiller, K. D., & Jacobs, R. W. (1992). Changing the way organizations change: A revolution of common sense. The Journal Of Applied Behavioral Science, 28(4), 480-498.

Deming W. E. (1986). Out of the crisis. Cambridge. MA: Massachusetts Institute of Technology.

Kotter, J. & Heskett, J. (1992) Corporate culture and performance. New York: The Free Press.

Kroll, M., Toombs, L. and Wright, P. (2000, Feb) Napoleon’s tragic march home from Moscow: Lessons in hubris. Academy of Management Executive 14 (1) (pp. 117-128).

Latham, J. R. (1995). Visioning: The concept, trilogy, and process. Quality Progress, 28(4), 4.  Download

Latham, J. R. (2013). A framework for leading the transformation to performance excellence part I: CEO perspectives on forces, facilitators, and strategic leadership systems. Quality Management Journal, 20(2), 22.  Download

Senge, P. (1990). The fifth discipline. New York: Currency Doubleday.

Quinn, R. (1996). Deep change: Discovering the leader within. San Francisco: Jossey-Bass.

http://johnlatham.me/ 

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