of Teaching the Elephant to Dance

Empowering Change in Your Organization

ORGANIZATIONS ARE LIKE ELEPHANTS--SLOW TO CHANGE

Over the past decade I've consulted with, studied, and managed a wide range of organizations. My experience tells me that organizations are like elephants--they both learn through conditioning.

Trainers shackle young elephants with heavy chains to deeply embedded stakes. In that way the elephant learns to stay in its place. Older elephants never try to leave even though they have the strength to pull the stake and move beyond. Their conditioning limits their movements with only a small metal bracelet around their foot--attached to nothing.

Like powerful elephants, many companies are bound by earlier conditioning constraints. "We've always done it this way" is as limiting to an organization's progress as the unattached chain around the elephant's foot.

Success ties you to the past. The very factors that produced today's success often cause tomorrow's failure. Consider Xerox, for example. Xerox had a close call with disaster--and it was mostly because of its own success. In the early and middle 1970s Xerox could do no wrong--at least that's what they thought. They hired the best people, had the best marketing activities, and "owned" the market. Even to this day executives say, "Make me a Xerox," when they want a copy. But all the "right" activities led the company to the brink of disaster.

Believing they were invincible, Xerox executives refused to take the Japanese competition seriously. They didn't realize, for instance, that the Japanese had a 50 percent cost advantage until five years after they lost significant market share. CEO David Kearns saw the need for change.² He got his elephants to leave their past constraints behind.

Talking about institutions trapped by their successful past, how about Sears? Sears was the largest U.S. retailer. But Sear's merchandise sales actually declined 2.4 percent--during a period of double-digit inflation in the 1970's and early 1980's. Sear's stock price fell from $62 a share in 1972 to $14.50 per share in 1980. Yet no one was willing to change the creaking bureaucracy that assureds high overhead costs--forty executives in the drapery department alone--and slow response to changes in customer tastes.

It took massive intervention to save the unwilling patient. Nothing less than all-out war--in the words of Sears CEO Ed Brennan-- "to destroy a thing called Headquarters and a thing called Field and create a thing called Sears." Store closings and 21 percent reduction in employment, including the early retirement of 1,500 career executives, prodded the elephant to consider new ways;. Slowly, the "Store of the Future" took shape--very slowly--too slowly for customers as Sears continued to lose market share. Can Sears survive? There are hopeful signs. But the jury is still out.³

Previous successes and past practices root American and European companies firmly to old ways of doing business will not succeed in the future.

In today's fast-paced world, elephants are an endangered species. Slow, ponderous, bulky pachyderms can't move fast enough to escape the competitive laser gun. Fleetness of foot is required. So gazelles survive, not slow-to-change elephants.

 EMPOWERMENT CREATES CHANGE

Needing change doesn't make it happen. Too many organizations still have metal bracelets around their feet. You need to mobilize the support of your people behind your change.

There's no doubt that General Motors needs to change. Consider these facts. In 1986 GM had the highest labor cost of any U.S. or Japanese car company, $4,148 per vehicle compared to $2,379 at Ford and $630 for Toyota. And that's after GM invested $45 billion to improve its competitive position. Ford workers turn out 85 Tauruses per person per year, while the best GM workers turn out 68 Corsicas and Berettas per worker per year. Quality has been a big focus for GM over the past several years, stung by Ford's success with the "Quality is Job 1" motto. Quality has improved. The number of defects for GM cars reported by new car owners after ninety days has dropped 8 percent over the past two years. But the Japanese imports report a similar 8 percent improvement, and they still show a stunning 37 percent fewer problems.⁵ There are positive signs indicating that GM is changing--slowly. Can GM make it? No one knows. We do know, though, that the need for change doesn't necessarily produce change.

Jaguar, the U.K. luxury car maker, faces similar problems. Though it has doubled output per employee over the past four years, it still lags behind its principal competitors, Mercedes and BMW, by as much as 50 percent. The huge cash required for new models and equipment modernization pose additional challenges. Perhaps that's why Jaguar directors were willing to sell their British heritage for some American porridge from Ford Motor Company. All over the world organizations face the need for change--and mobilize the people to create it.⁶

How about strategies when you are in a volatile multinational market and try to dance with a gorilla? Ask Steffan Edberg. He's the Managing Director of the highly successful IBS, a Swedish-based IBM software and services business partner. Steffan's organization is the largest IBM mid-range system agent in Europe. He's grown by acquiring small, well-positioned firms in several European countries. Lychgate, plc, for instance, is his 95 percent-owned U.K. subsidiary.

Steffan brings to the table cross-border contracts, bargaining clout with the gorilla of the industry (IBM), and a depth of experience in the software and systems industry. Each firm retains its present management and draws from the capital and accumulated experience base of its other multinational offices, strengthened by the group's synergy.

Listen to several experts on how to create change.

Jack Welch, CEO of General Electric, is one expert in producing change. He says, "We have found what we believe to believe to be the distilled essence of competitiveness. It is the reservoir of talent and creativity and energy that can be found in each of our people. That essence is liberated when we make people believe that what they think and do is important--and then get out of their way while they do it."7

Welch's message: Empower people to change. Help them focus their energies on the new ways.

Welch restates the words of Mr. Matsushita, founder of successful Matsushita Electric company: "For us, the core of management is the art of mobilizing the intellectual resources of all employees in the service of the firm."⁸

"Get people to create the change," says Mr. Matsushita.

Peter Drucker, the greatest management mind in this century wrote similar words in 1946. He said, "Any institution has to be organized so as to bring the talent and capabilities within the organization; to encourage men to take initiative, give them a chance to show what they can do, and a scope within which to grow."⁹

This idea is not new. In the late 1700 Adam Smith similarly felt that the empowered actions of millions of people were much more likely to create economic progress than the intelligent decisions a few royal appointees.

Empowerment creates change.

THE DISTILLED ESSENCE OF HOW TO EMPOWER CHANGE

Several persistent themes haunt my experiences in changing organizations. In a world of seeming complexity, they are simple themes--themes that sound clarion-clear messages. These themes form the nexus for this book. I believe they are the way to empower people to change their organization. This is the way to teach the elephant to dance.

LEADERS CREATE NEW TOMORROWS

Markets continually change. Customers continually change. Technology continually changes. Competitors continually change. Each change triggers the need to create a new tomorrow.

The active leader--at any level in the organization--identifies this need and moves quickly to develop a new strategic approach. This new strategic approach contains three elements:

1. Reposition products/services to build a competitive advantage;
2. Talented people to execute the new strategies; and
3. Organizational resources that tightly focus on the new strategies.

First come strategies that meet the new conditions in the marketplace, strategies that give you an advantage.

The need for a strategy based on product differentiation hasn't changed much in 2,500 years. In 431 B.C. Pericles recognized the need to identify those factors that made Athens superior and gave it the upper hand in its war with Sparta. He identified Athens's openness, optimism, and opinion leadership position. Pericles sounds very much like many Silicon Valley executives as they wage war against the Japanese imports. In fact, niche players are the survivors on today's Fortune 500 list.

In San Francisco, Fritz Maytag has crafted a similar competitive edge-producing strategy. He's president of Anchor Brewing Co., a microbrewery that sells less than forty thousand barrels of beer a year and employs fourteen full-timers and seven part-timers. He saw that quality in beer making was his competitive edge. He's organized his entire company around the competitive edge of a quality beer made in the pure, traditional way.¹⁰

In the same industry, Anheuser-Busch-which sells more beer in one day then Fritz sells in a year--uses target marketing as its way to gain a competitive edge. Anheuser-Busch sponsors events and advertising that tailors its message specifically to 210 different U.S. markets. From the military beer drinkers ("This Bud's for all the men and women who proudly serve this great country") to the waiters and waitresses ("This Bud's for everyone who serves 'em cold"), Anheuser-Busch seeks to be unique by being everybody's hometown beer.¹¹

Second, get the "right" people to execute your new strategy. When Fritz Maytag first started his brewery twenty years ago, he couldn't hire the "right" kinds of people to work full-time at the wages he could afford. He found he could hire very qualified people who wanted to do exciting things a few hours a week and earn good money for the hours that they worked. So Fritz hired a small group of part-timers, who turned out to be the "right" people.¹⁴

Pat McGovern, founder and chairman of $300-plus million U.S. company International Data Group, Inc., knows the importance of finding the right people to run his operation. His company published over one hundred publications in thirty-six countries with over 2.8 million subscribers. His publications dominate information services for the information technology industry.

How do you run sixty-five semiautonomous business units? "With great people," Pat replies. Recognizing his own tendency to want to do everything himself, Pat has become an ardent delegator. He gives each manager complete autonomy to submit business plans and then run his/her business as long as the critical performance standards are met. Pat abhors central control and direction. "If they want to do it--they can do it," he says. "No one in the central office- including me--ever says no."

Does it work? Compound growth rates of better than 30 percent and after-tax margins exceeding 10 percent--several times the industry average--speak for themselves.¹⁵

Third, focus the resources on your new strategies. Without resources your new strategies will be nothing more than pipe dreams. Jack Welch, CEO of General Electric, sold off more than $5.6 billion worth of industry "also-rans" and shifted resources into businesses where GE was either number one or two in the market. The result? GE's profit margin grew by two percentage points to 10.4 percent and earnings grew at a compound annual rate of 10 percent.¹⁶

Together these three prerequisites--new strategies, key people, and focused resources--help you decide on the "right" new directions. It's essential to move fast to make it happen. August Busch III is a classic example of a change-making executive who makes tough decisions--quickly. When his highly successful beer operation was rocked by scandal in 1987, Busch moved in aggressively. He fired the three executives involved and accepted the resignation of his long time friend, Dennis Long, the president of the beer unit. Busch then committed to run the beer unit directly for the next two years to ensure the roots of scandal were all stamped out.¹⁷ It takes guts to change, but--if you don't--the economic end is no less certain, only more painfully time consuming.

GE's Jack Welch built his organization to respond quickly to changing circumstances. He eliminated two executive organization levels and had the more than thirty business unit heads report directly to him. He also eliminated 40 percent of the headquarters staff to remove the nay sayers. The system works, Brian Rowe, senior vice-president and group executive of GE's aircraft engine business, reported that quick decision making enabled his division to develop a new mid size fan jet for the Airbus 340 that resulted in $1 billion of orders. "Under the old bureaucratic system, we'd still be just talking about it," Rowe says.¹⁸

There is no rest. Change is a continuous process for large companies and small companies alike. Take the case of E.T.C. Carpet Mills, Ltd., a Californian carpet manufacturer. President Michael M. Berns saw that the way to grow his company was to put some fun into what was a dull and boring industry. So he gave wild theme parties for employees, suppliers, and customers (like he time he announced a new vice-president at a "coronation for the Prince of Sales," where employees wore sixteenth-century costumes and a carriage delivered the new vice-president to the podium). He gave crazy names (like Cold Hands and Closed Wednesday) to his carpet colors and issued comic books instead of sample books. It worked as sales went from $1 million in 1973 to $33 million in 1978.

But then in 1979-81, Berns almost lost his business as interest rates soared and the economy (particularly for big ticket items like carpets) fell through the floor. He saw clearly the need for a new strategy. Berns knew the if he couldn't become the low-cost producer, E.T.C. Carpet would be history. He set a new strategic direction of efficiency, redeployed his key people by returning managers to working levels and adding a key financial controller, and redirected his resources from comic book to developing new, efficient methods. He also worked hard to mobilize his people to support his new strategic direction. (I'll get to how he did the in a few pages.) Berns survived and prospered (his 1986 sales were back at $33 million with record earnings) because he saw the need to change and moved fast to do it.¹⁹

Unfortunately, seeing the right new tomorrow isn't enough. You need to mobilize the support of your people to create that new tomorrow.

A VISION FOCUSED AND ENERGIZES THAT NEW TOMORROW

My experience tells me that an energizing, inspiring vision is the key to mobilizing support. This vision is the picture that drives all action. It includes both deeply felt values and a picture of the organization's strategic focus.

Father Theodore Hesburgh built Notre Dame into a major American university during his thirty-five years as president. He infused his vision of a revitalized Notre Dame in students, alumni, faculty, and the general public. Talking about his role in changing the university, he said, "The very essence of leadership is you have to have a vision. It's got to be a vision you articulate clearly and forcefully on every occasion. You can't blow an uncertain trumpet."²⁰ Father Hesburgh's trumpet was never uncertain.

A vision is a certain trumpet. It identifies clearly for all concerned--employees, customers, and suppliers--exactly what the organization stands for and precisely why they should support it. A vision both enhances an organization's marketplace competitive advantage, such as IBM's "Provide the best customer service," and provides deep personal identification with the organization's work, such as ServiceMaster's "To serve God in all we do."

Fritz Maytag has a vision for his company--quality beer made in the pure, old-fashioned way. He works with his employees by making the best beer, gathering the best malt, learning the best ways to brew. He takes his employees to England to visit little breweries, to Germany to learn how to brew wheat beer, and to Oregon to ride the combine that gathers barley for their beer. He spends much of his time talking to people about his vision, making certain that everyone remembers what the brewery stands for.²²

In the same industry, but on a much larger scale, August Busch III pushes his vision. Every evening Busch samples the beers produced by his eleven breweries that day. He examines each one for balance and taste to be certain that it meets his personal standard of quality. Then he tells his chief brewmaster whether or not they can ship that day's production. To ensure that his public image matches his vision, Busch personally supervised the details of his advertising program. (He once insisted that an entire commercial be reshot because the horses looked too thin.) He then makes certain that all the advertising is also posted throughout his organization. No one will forget the company's vision.²³

Part of CEO Mike Berns's vision for E.T.C. Carpet calls for self-management in the improvement of efficiency. He spends a lot of his time talking to employees about self management and teaching it as his "Carpet University." He works hard to get his supervisors, managers, and employees to use his vision.

Vision tightly directs attention to the critical factors that produce long-term success. It may be the customer service and employee respect at IBM, or the search for the unshakeable fact at DEC, or the new product development at Ralston. Whatever, your vision becomes a decisional guide. At every juncture employees ask, "Is my action in keeping with the vision?" This focus- and inspiration--empowers people to change.

Vision is needed at all levels in an organization. The supervisor of the mailroom needs a vision for that mailroom. The manager of data processing needs a vision for the DP department. The accounts payable clerk needs a vision for his/her job. Vision--throughout the organization--focuses and inspires effort.

PARTICIPATION EMPOWERS CHANGE

The single thread that runs through all of my "success" stories--and correspondingly is absent in most of my "failures"--is the involvement of large numbers of individuals in drafting the vision. Cross-disciplinary-, multifunctional-, multi organizational- level teams empower people to understand and support the vision.

Royal Insurance (U.K.) Ltd. is the second oldest non-life insurance company in Britain. Managing Director Peter Duerden saw the changing nature of the insurance business. After he had studied the winners and losers among his product lines--and discovered that the presumed winners were actually losers and the assumed also-rans actually the big winners--he launched Operation "Staying Ahead." He appointed sixteen managers to work with the Boston Consulting Group in planning and implementing the new strategic direction. Duerden kept the entire staff informed- including the unionized work force--asked for, and got, more than two hundred personal letters from staff members with suggestions. After study, the group recommended and installed a reorganization that shifted more than half of the jobs geographically or skillwise, dropped management levels between customers and service providers, and lowered the age of management by ten years. Participation in the program led to its swift adoption and payoff at the bottom line. In 1986 Royal's income grew 21.7 percent.²⁴

ORGANIZATIONAL SYSTEMS REINFORCE THE SYSTEM

Organizational systems give people the tools to use the new vision. They give people permission to use those tools. Performance systems guide day-to-day activities. They must expect, measure, and reward using the new vision. Human resource/personnel policies give permission to use the new vision tools. Selection, orientation, training, promotion, and compensation policies encourage the use of the vision. Last, the cultural system--heroes and symbols--subconsciously reinforces the use of the new vision.

ServiceMaster, the $1-plus billion janitorial services U.S. firm, provides extensive training to its people to empower them to use the ServiceMaster vision. General partner William Pollard said, "Before asking someone to do something, you have to help them be something." Pollard's organization provides detailed instructions on the "something that needs to be done"--a three-inch thick manual that breaks the job of floor polishing down into detailed five-minute cycles. And they provide a plethora of individual training programs designed to help employees "be something." The vision plays a prominent role in all of these training activities. It is discussed frequently during the meetings.²⁵

Organizational systems empower using the vision.

ACTIONS TELL THE TALE

Your actions tell the tale, You are the point person toward whom everyone will look--and most people will follow. The bottom line in all change efforts is the dedication and commitment--as it is reflected in concrete, specific actions--of the individual driving the process.

Consider the following example of how Ray Kroc instilled his vision of cleanliness:

On his way back to the office from an important lunch at the best place in town, Ray Kroc asks his driver to pass through several McDonald's parking lots. In one parking lot he spots papers caught up in the windscreen of shrubs along the outer fence. He goes to the nearest pay phone and calls the office, gets the name of the local manager, and calls the manager to offer to help him pick up the trash in the parking lot. Both Ray Kroc, the owner of McDonald's chain (in his expensive business suit), and the young manager of the store meet in the parking lot and get on their hands and knees to pick up the paper.

This anecdote is told and retold thousands of times within McDonald's to emphasize the importance of the shared vision of cleanliness. In short, your actions in living your vision, much like Ray Kroc's action on living his, will motivate your employees to use The new vision.

To graphically symbolize this process--and provide you with a continual program of the book-- the following graphic heads every chapter.

GETTING STARTED--THE PLAN OF THE BOOK

In the following chapters you'll walk through the basics. I'll spice up your reading with examples from large organizations--IBM and British Air--as well as mid-size organizations such as Mrs. Fields Chocolate Chippery and local government departments, and very small start-up companies such as Lychgate Ltd. I believe that every organization can change. My examples reflect my belief.

I intend to give you lots of examples to demonstrate that change can happen. The elephant can learn to break its chain to the past. Change is not an event, it is an enjoyable and rewarding journey. I'll help you by pointing out the trials left by others.

At each of these phases you'll walk through the most important operational decisions that indelibly shape your effort. At each stage you'll be actively involved in the process. I intend this to be a hands-on book, one that will provide you with the opportunity to work along with me.

MY BIAS--JUST SO YOU KNOW

No first part is complete until the author lays out his biases for you, the reader. In that way you can evaluate whatever I say in terms of my prejudices.

I believe in action. In this world it is not what you know that matters. Rather, it's what you do with what you know that counts. Information is valuable--action is invaluable.

I want to encourage you to act today to begin the change process. I want you to talk today with your people about the vision you and they would like to see for your organization. I want to encourage you to meet today with your people and discuss how all of you can use your vision to accomplish your new strategies.

And so, on with the journey!

1. "Competitiveness: 23 Leaders Speak Out," Bruce E. Scott, Harvard Business Review, July/August, 1987, 106-123.
   "The Selling of America," Jacylyn Fierman, Fortune, May 22, 1988, 54-64.
   "Can America Compete," Business Week, April 20, 1987, 45-69.
   "Stark Proof of Japan's Muscle," Business Week, July 17, 1989, 188.
2. "Xerox Rethinks Itself: And This Could Be The Last Time," Business Week, February 13, 1987, 90-93.
   Culture Shock at Xerox," Business Week, June 22, 1987, 63-67.
3. Donald Katz, The Big Store (New York: Viking, 1987).
   "Why Bigger is Badder at Sears," Patricia Sellers, Fortune, December 5, 1988, 56-60.
4. "They Buy Their Stocks Where They Buy Their Socks," Steve Weiner, Forbes, March 7, 1988, 60-67.
5. "Why U.S. Car Makers Are Losing Ground," Alex Taylor III, Fortune, October 2, 1989, 97-116.
   "GM's Bumpy Ride on the Long Road Back," Business Week, February 13, 1988, 74-78.
   "Make or Break Time for General Motors," Thomas Moore, Fortune, February 15, 1988, 32-42.
6. "The Great Rebound: Britain Is Back," Richard Kirkland, Jr., Fortune, May 9, 1988, 114-123.
7. "Jack Welch: How Good a Manager?" Business Week, December 14, 1987, 38-41.
8. Internal document, McDonnell Douglas, n.d.
9. Internal document, McDonnell Douglas, n.d.
10. "The Joys of Keeping the Company Small," Fritz Maytag, Harvard Business Review, July/August 1986, 6-14.
11. "How Do You Follow an Act Like Bud?" Business Week, May 5, 1988, 118-119.
12. "The Joys of Keeping the Company Small," Fritz Maytag, Harvard Business Review, July/August 1986, 6-14.
13. Inc., August 1988, 27-33.
14. "Jack Welch: How Good a Manager?" BusinessWeek, December 14, 1987, 38-41.
    "Not Power, But Empower," Forbes, May 30, 1988, 120-123.
    "What Welch Has Wrought at GE," Fortune, July 7, 1988, 25-28.
15. "Anheuser-Busch: The Scandal May Be Small Beer After All," Business Week, May 11, 1987, 72-73.
16. "Jack Welch: How Good a Manager?" Business Week, December 14, 1987, 38-41.
    "Not Power, But Empower," Forbes, May 30, 1988, 120-123.
    "What Welch Has Wrought at GE," Fortune, July 7, 1988, 25-28.
17. "When the Fun Is Over," Michael Berns, Inc., May 1987, 112-113.
18. "His Trumpet Was Never Uncertain," Time, May 18, 1987, 68.
19. "The Joys of Keeping the Company Small," Fritz Maytag, Harvard Business Review, July/August 1986, 6-14.
20. "How Do You Follow an Act Like Bud?" Business Week, May 5, 1988, 118-119.
21. Business, October 1987, 90-92.
22. "Lessons in the Service Sector," James L. Heskett, Harvard Business Review, March/April 1988, 121.
    "ServiceMaster: Looking for New Worlds to Clean," Business Week, January 19, 1987, 60-61.
    "Cleanliness, Godliness, and Business," Charles Siler, Forbes, November 28, 1988, 219-222.