Organizational change in the internet age

from The Rational Edge: Business organizations must understand, embrace, and drive change if they hope to survive. This article address the factors and dynamics organizations must understand to manage and drive change effectively, and it discusses the best management practices for implementing change? This article addresses these questions.


Sidney E. Fuchs, Director of Professional Services, IBM

As a Director of Professional Services at IBM Rational, Sidney E. Fuchs led and managed deployment teams and large software projects for a variety of commercial and government customers worldwide over the past several years. Before joining Rational, he held sales management positions at Digital Equipment Corporation and Oracle Corporation, and was Vice President of Professional Services at McCabe and Associates. In addition, as a former Central Intelligence Agency Officer, he was responsible for the development and operations of several multi-hundred million dollar National Technical Overhead Assets and Systems. He received his B.S. and M.S. in Mechanical Engineering from Louisiana State University.

09 March 2004

imageThe one constant in the Internet Age is change. Continual advances in software development and Internet and communications technology, coupled with increasing demands for information, have created a new, constantly evolving business environment driven by requirements to deliver quality products and services faster, the challenge to exploit new technologies, the prospect of new markets to discover and conquer, and a growing need for better customer relationship management.

For the software industry, these new demands mean that we will never again be "finished" with a plan or product. In the past we delivered new software releases on an annual basis; in the new economy, it is the norm to deliver them several times a year -- and even weekly or daily for some Internet-based companies.

Clearly, in a world that is characterized by such a heightened sense of urgency, companies and organizations must understand, embrace, and drive change if they hope to survive. What factors and dynamics must organizations understand to manage and drive change effectively? Then, based on this understanding, what are the best management practices for implementing change? This article addresses these questions.

Laying the Foundation for Organizational Change

When it comes to change, too often high-tech organizations focus almost exclusively on technology (new tools, processes, equipment, etc.) and all but ignore the need for modifications in culture and behavior. Change, by nature, intrudes on people's "comfort zones," so many equate it with pain, whether or not they think it will result in improvements. Inevitably, workers meet change with resistance, so it is critical for organizations to address this key issue up front.

In fact, it's important to recognize that cultural and behavioral factors are the essence of organizational change -- basic building blocks that lay the foundation for it. Unless these blocks are in place, technology introductions will fail to satisfy expectations and may even produce adverse results.

Briefly, here are some descriptions, along with questions that can help organizations assess their readiness for a change initiative:

  • Leadership -- Is there adequate leadership at all levels? From the top executive down to the practitioner, leadership is necessary for driving and sustaining changes. Leadership comes in many forms, but commitment, conviction, and the ability to guide the organization through unknown territory are critical qualities for success.
  • Vision and Planning -- Has the organization formulated a flexible plan, and does everyone understand its goals and objectives? Change, of course, does not always result in progress, so if the value proposition of a change is unclear, that is the first problem to address. The plan should be abstract enough to allow the organization to adapt to changing environments but precise enough to produce desired results in the early phases. The plan and vision document should also identify key dependencies (skills, equipment, etc.) and risk factors.
  • Reasonable Alternatives -- Has the organization considered and studied options and alternative paths? The best-laid plans may have to be put aside if the unpredictable occurs. Organizations should identify and then examine alternatives within a "trade space" bounded by fixed constraints (budgets, timeline, needs vs. wants, etc.).
  • Culture and Behavior -- Is the organization changing or willing to change the way it is structured and the ways in which it thinks, distributes incentives and rewards, and approaches new challenges? Leaders need to ensure that all stakeholders have a sense of urgency about implementing the prescribed plan and responding to new demands. Also, they may need to raise the bar for performance and quality.
  • Skills, Resources, and Personnel -- What new talents, equipment, and experiences will be required to drive and sustain this change? In addition to the latest technology skills, project management, leadership, vision, interpersonal skills, and commitment are key. In addition, the organization must value training programs and make sure they play a key role in the overall solution.
  • Technology -- What new technologies (tools, process, equipment, etc.) does the organization need and who will use them? To answer these questions, you must size up the leap between where the organization is now and where you want to go. Then evaluate whether you have the time, budget, and personnel to support that leap. Also, be sure that the new technology will allow the organization to scale and adapt to changing environments. And finally, assess whether the new technology will yield enough return on investment to make the effort cost effective.

Obviously, the extent to which each of these requirements needs to be addressed is dictated by the scope of change and the organization's complexity. Overhauling the business systems in an organization delivering a DoD Weapons or Avionics System (which typically involves many subcontractors, partners, and vendors) requires more planning, coordination, and management than developing a Web-based interface for an e-commerce customer within a small, nimble systems consulting firm. Both the plan and process for change should be scalable and tailored to meet the particular needs of the organization.

Top Ten Best Practices for Implementing Organizational Change

What are the best ways to ensure that these building blocks are in place and that your organizational change initiative will be successful? Although the primary mission of Rational Software's Strategic Services Organization is to assist customers in adopting new technologies and processes to accelerate their software development capabilities, we frequently get an inside view of our customers' organizational dynamics. Because of this, customers frequently turn to us for help in driving change throughout their organizations.

Through many years of experience, we have identified a number of best practices that are consistently successful in reducing risk and driving change. The following list, arranged in descending order of priority, is by no means exclusive, nor is it intended to be a recipe. Rather, it provides a high-level overview of key requirements and suggestions for bringing about effective organizational change, including many we touched upon in the "Foundations" discussion above.

These best practices are not unique to the high-tech industry; any organization in any market or industry can benefit by employing them. Also, keep in mind that in the Internet economy, changes affect not only your organization, but also your customers, suppliers, and partners. This is especially true if the change is a pervasive one that affects all components of your organization's business.

1. Identify and agree on key change drivers.

Organizational change should be driven by a key business concern (time to market, quality, efficiency, etc.) that is significant, well understood, and articulated throughout the organization. If people perceive that you're making a change simply for change's sake, then you'll cause more problems than you will solve. If they perceive that there's a real problem or opportunity and understand the negative effects of not taking action, however, then stakeholders will support your change initiative.

2. Create demand for change; don't mandate or force it.

This relates closely to number 1. If you want everyone in your organization to adopt a change, then you must create demand for it at every level. Make sure each person understands the problems you are addressing and has a feeling of ownership for the solutions you're proposing. This "buy in" is required if you expect stakeholders to drive change and withstand setbacks and hurdles. When managers give orders demanding change, they meet with resistance, halfhearted attempts to adopt the change, false starts, enormous amounts of wasted time and money, and sagging morale. If you recognize that the change will not benefit all stakeholders involved -- some may suffer reductions in territory, budgets, or titles, for example -- it is best to address these issues immediately and formulate agreements with these stakeholders concerning their new roles and responsibilities. If you can't get their buy-in and support and you discover that they're undermining your efforts, then you may need to take more severe measures.

3. Exercise consistent leadership and communication practices.

This applies to everyone from top managers on down to group leaders. Lack of leadership and vision will cause the change effort to stall and lose credibility. Changes to your plan are inevitable, and it is critical to keep the troops informed about when and why you make them. In environments with poor top-down communication, people consistently look for signals or signs that let them know how things are going. Often, they identify the wrong signals or misinterpret correct ones. For example, if a project start is delayed, or if management is holding more "closed door" meetings than usual, then employees may incorrectly assume that things are not going well for the project.

It is important for the management team to communicate in all directions and to behave as a cohesive unit with a consistent message. If managers appear to be fractured and out of synch, then team members will quickly become concerned. A consistent regime of talking openly, sharing information, and helping others understand the common vision will ensure cohesiveness across the organization. It is also critical to keep the message simple so that it can remain consistent over time and not promote confusion or misinterpretation.

In particular, if managers decide to depart from the path they were on and pursue another, then they need to re-seek support and buy-in from other parts of the organization. If they fail to do this, then much time and money will be wasted trying to get everyone on the same page.

4. Continually update and fine tune the vision and project plan.

In the initial planning phase, creating the vision and project plan helps managers identify key issues and risks, establish good communication and strong relationships among stakeholders, and fix a starting point that everyone can agree on. It's important to remember, however, that these plans are not set in stone. The vision and project plan are living artifacts, not static documents (as they are frequently communicated). They provide a roadmap for change, but it will be necessary to correct the course and validate the direction throughout the implementation. Also, as new employees and teammates come on board, it is important that they understand and adopt the vision and plan.

5. Achieve incremental, demonstrable success.

Nothing can stall an effort like starting with an overly ambitious plan that tries to address every issue or project at once. Instead, the best strategy is to strive for incremental, demonstrable success as you implement the plan in stages. This will help stabilize the environment and build the confidence, credibility, and experience needed at each phase to manage chaos and sustain performance. The same approach works well for adopting a new process, including the Rational Unified Process. Start with a few key areas or workflows and add more as the organization's confidence and capability evolve.

For your first success, it's strategically important to choose a fairly complex project that management regards as highly important. In the course of such a project, you can identify dependencies, risks, and unforeseen problems up front. Plus, involving top players will not only increase the project's chances for success but also ensure more management attention and support.

6. Find champions for your solutions at all levels.

Early on, it helps to identify champions at all levels who support your solutions and can get the change process moving forward on the right track. These people can also provide valuable insights on the working environment and team morale. Remember that potential champions may take different forms and hold various titles, so be sure to do a little digging for the right people.

7. Acquire and develop new employee skill sets.

Change creates demand for modern techniques, skills, and mindsets. As you formulate a vision and plan, it's important to identify what new skills will be required to facilitate change and operate in the new environment. Very likely, you'll need a training program to keep the skills of current and future employees up to date. In addition to strong technical skills, you'll need top-level project, business, and personnel management skills. Software organizations often lack depth in these non-technical areas, but their importance should not be underestimated.

8. Establish a collaborative environment.

At the outset of any change initiative, it is essential to establish a collaborative working environment among all stakeholders and partners. Successful organizational change requires risk sharing, a collective sense of ownership, and the ability to leverage the knowledge and skill sets of people across the organization. Technical change, for example, requires bilateral knowledge transfer in disciplines such as domain expertise and modern software development techniques. Throughout the project, teams should strive to maintain a high-trust environment that fosters collaboration. If they employ on-site contractors to do the bulk of the process work, they can invite them to collaborate, but staff employees must retain ownership of the change process. After all, the organization's success is on the line, and employees have a far greater stake in the outcome.

9. Collect and use metrics to monitor progress.

How do you monitor project status and know when things are going well or going wrong? Too often, organizations spend an enormous amount of time planning how they are going to implement change, but too little on understanding which metrics are critical to monitor a project's performance. It is important to capture the right metrics (schedule performance, open/closed discrepancy reports, action items, cash burn rate, manpower profiles, EVA analysis, etc.) on a regular basis and use this data to perform course corrections as needed.

An initial metrics assessment can help team members identify which metrics are of value, learn how they are typically collected and analyzed, and understand what they reveal about an organization's current state. Then, this assessment can be used as a benchmark for moving forward and to get people thinking about how metrics can help their effort.

10. Overhaul incentives before you begin.

If you're asking employees to adopt a change that will require modifications in behavior, skill sets, and responsibilities, then you must also ask yourself, "What incentives do they have to make these adjustments and ensure the initiative's success?" Making changes to incentive programs before the change process begins will generate the energy and behaviors critical to success. This includes providing incentives for those who may lose something in the transition to keep their motivation and self-esteem intact. You can structure incentives around achieving milestones on or before schedule, a certain level of quality, or other specific goals, for example.

Find the Right Pace

How long will change take? Organizations move at different speeds when adopting new technologies or processes. The pace of change depends on many things, including how well management internalizes and implements best practices, and creates an environment conducive to continual change. And even within an organization, the speed of individual projects will be different. Although it's important to move as quickly as possible to achieve time-to-market goals and competitive advantages, it's also important to determine the correct pace for each team. Move too fast and quality will suffer; teams will get frustrated and lose confidence. Move too slowly and the window of opportunity will close; plus, teams may begin to question the value of change and lose patience.

As with any learning experience, you can expect to encounter setbacks and hurdles. View these as opportunities to gain knowledge that the organization can build on, and don't allow your teams to get discouraged and lose focus. Make an effort to create an environment that advocates and rewards some level of risk taking. Without this, people will not be bold enough to propose new ideas and push for innovation. When change ceases, so does improvement and growth.


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ArticleTitle=Organizational change in the internet age