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The Answer to Culture Change: Everyday Management Tactics

Organizations often invest time, money, and leadership capital in performance improvement initiatives that show early promise only to later fail. The challenge of sustaining improvement continues to frustrate health systems across the globe. Through years of studying such change management and quality improvement activities, the Research and Development team at the Institute for Healthcare Improvement (IHI) has learned that the missing piece to sustained improvement at the delivery interface has less to do with care model redesign, incentive payments, IT hardwiring, or policy shifts and more to do with rethinking management structure and practice — or, more specifically, using the management system as a substrate to create a culture of transparency, continuous improvement, and frontline engagement.

In this article, we discuss the results of two pilot initiatives, led by IHI, that resulted in sustained, significant improvements in quality and value in two very different contexts — outpatient care in the U.S. and acute inpatient care in the U.K. — through management interventions that resulted in significant cultural change.

The High-Performance Management System: A Tactical Model to Drive Sustained Value Improvement via Culture Change

Management theorist Edgar Schein defined culture as a shared way of thinking and feeling about problems that an organization faces over time.1 Changing culture can feel amorphous and unfocused, whereas making investments in data systems and analytics that can affect behaviors sometimes seems more practical, tangible, and, in some senses, easier. In order to change culture and thereby realize the performance gains that they seek, leaders need a clear pathway that will allow them to impact values and beliefs. The literature suggests that this pathway can be provided by a set of disciplined management practices that engage the front line.

To that end, IHI partnered with multiple health care providers in the U.S. and Europe to synthesize and pilot test a set of management practices (which became known as the High-Performance Management System, or HPMS) to effect a set of behaviors that result in cultural shifts toward transparency, proactive problem-solving, and continuous team collaboration. These management practices, derived from systematic approaches to quality improvement and Lean principles, have resulted in sustained new levels of organizational performance and reduced costs with our testing partners.

Developing the High-Performance Management System

Starting in the summer of 2015, IHI studied a group of ten high-performing health systems in North America with notably strong organizational cultures (e.g., Intermountain Healthcare, ThedaCare, Denver Health, Geisinger, and others) to derive a set of management practices that might result in sustained high performance.2 The findings from that study suggested that the core elements of such a system included standardization, accountability, visual management, problem-solving, integration, and escalation.

Core-Elements-of-the-High-Performance-Management-System

Refining the System to Reduce Utilization and Cost

Starting in fall of 2015, IHI refined this set of ideas and tools to explicitly drive reductions in utilization and cost. The refinements included weekly collection and reporting of operational measures (e.g., time of discharge), capacity measures (e.g., time spent in direct face-to-face patient care), and financial measures (e.g., agency nursing cost), as well as the incorporation of refined visual management tools and a weekly value management huddle. (It should be noted that capacity measurement in practice does not necessarily take place weekly. Capacity measurement requires frontline staff to track their activities over the course of a shift, after which the manager aggregates data from multiple shifts. Given this sampling method, the data collection often best proceeds every 3 to 4 weeks.)

Testing the High-Performance Management System

To test the effectiveness of the HPMS, IHI ran pilots in two geographically and clinically disparate settings: (1) two ambulatory surgery centers in the United States and (2) fifteen units in hospitals in the Scottish National Health Service (NHS). These tests showed that the High-Performance Management System, combined with a focus on continuous review of financial data, offers a solid foundation for positive cultural change to effect continuous value improvement.

Ambulatory Surgery Setting: Testing the Fundamentals

In 2012, the Agency for Healthcare Research and Quality (AHRQ) began funding hundreds of ambulatory surgery centers to participate in multiple cohorts as part of a learning collaborative to improve patient safety.3 Participating centers introduced practices such as surgical time-outs, safety concern escalation behaviors, and improved processes such as the introduction of updated guidelines for equipment processing and sterilization. While progress was seen clearly during the cohort period, project leaders at the Health Research and Educational Trust (HRET) noted frequent regression to mean performance in the cohorts after attention was focused on the next cohort.

In early 2016, HRET invited IHI to introduce a set of practices to promote sustainability — in other words, to ensure that the safety practices that had been introduced were maintained after the sunsetting of the formal program. IHI worked to pilot test the key principles of the High-Performance Management System in two ambulatory surgery centers. In the spring of 2016, two expert IHI coaches skilled in applying the tools of improvement science worked with the sites to introduce management practices that they had identified as means to operationalize the HPMS. For example, the coaches worked with the sites to introduce a daily huddle that focused on a small set of specific actions (such as review of safety risks for the patients on the current day’s surgery list) and safety measures (such as the number of days since the last adverse event). The coaches also helped site leaders, including an administrator in one site and a quality manager in the other, to introduce simple visual management boards to display these measures, with examples of standard work and tracking of problems that had surfaced during the huddles.

One of the two sites reported its results. The other site experienced a change in ownership and leadership that led to discontinuation of the program. The site that reported its results experienced significant improvements, with a 10–percentage point increase in the AHRQ Patient Safety Culture Survey (from an average agreement of 82.5% before the beginning of the program to >93% 4 months into the program, with a higher percentage indicating stronger agreement with statements indicating a positive culture). Improvements occurred in every domain that was tracked in the survey, from prioritization of safety to teamwork and accountability. These improvements have continued, with the most recent survey results increasing to 95% in the winter of 2018.

In addition to these cultural improvements, the site reported multiple quality improvements and increases in the sustainability of previous changes following the introduction of the HPMS practices. For example, the site had previously focused on reducing immediate-use sterilization, which is an important process measure for ambulatory surgery centers as it can indicate inadequate planning for procedures. After the introduction of safety standard work in line with the AHRQ program’s teaching on standard work, surgical time-outs, and safety communication behaviors, the site initially saw a reduction in immediate-use sterilization but then saw some regression. With the introduction of the management practices, including huddles and visual management, the rate of immediate-use sterilization returned to approximately 0%, where it has remained for nearly 2 years.

U chart HPMS-Pilot-Site-Immediate-Use-Sterilization-Chart-U-Chart

In addition to these quantifiable improvements, HPMS practices resulted in numerous other instances of positive cultural change. For example, site leaders reported that frontline staff appeared to feel more empowered and engaged, with staff participation in the performance huddles identifying emerging leaders who subsequently received recognition via promotion. In addition, the site leaders adopted a set of key management behaviors to support these improvements. For example, the site’s quality manager routinely observed the team huddles, provided coaching, and worked closely with an administrative manager to monitor progress and provide the teams with feedback and encouragement.

The quality manager in the ambulatory surgery center also devised a particularly effective model of next-level leadership that has helped to sustain the High-Performance Management System over time and speaks to the “integration” dimension of HPMS. Specifically, she developed her own weekly report spanning all teams in the center, including preoperative and postoperative care, the sterilization unit, the business office, and the operating room. Each team has its own huddle system and huddle board. Every week, the teams report whether they conducted the huddle, whether they updated their measures, and which challenges arose during the huddle and required follow-up. In this way, the quality manager makes the observation of lower-level standard work (the huddles) her own standard work and supports sustainability.

Hospital-Based Setting: Testing the Approach with a Focus on Value

In tandem with the completion of the ambulatory surgery pilot, IHI introduced a modified version of the High-Performance Management System that focused on cost and value, with significant pilot testing occurring in the Scottish NHS4 that began in October 2016.

In this context, visual management included an explicit focus on cost through the use of a “box score” (a concise performance dashboard in the form of a spreadsheet that was updated weekly) and a visual management board (a physical bulletin board that outlined analyses and improvement projects linked to a small set of performance measures). In principle, the elements of the management system used in the inpatient setting were similar to those of the system used in the ambulatory setting, with a focus on cultural change through standard work and huddles, the introduction of visual management tools, a deep focus on problem-solving and continuous improvement, and the involvement of multiple levels of management.

Box score example IHI

 

Visual Management IHI-HPMS-Visual-Management-Board-Example

Testing the Model in an Inpatient Respiratory Ward

The effort began in a single inpatient respiratory ward (hereafter referred to as the “value prototype team”), with promising results. Two IHI staff supported the team in the initial phase of the work, with help from Lean consultant Brian Maskell, who pioneered the box score in the manufacturing industry. The intensive work with the value prototype team included two site visits to introduce the tools and to teach the site-based staff the HPMS approach. The IHI team also remotely attended the weekly huddles, during which all team staff, a physician lead, and a supporting accountant reviewed the value-focused visual management board.

To assess staff engagement and organizational culture, the IHI team implemented a survey tool (adapted from the AHRQ Patient Safety Culture Survey) that focused on communication, management, and collegiality. Staff were asked to respond to the following four statements with use of a modified Likert scale (strongly agree / agree / neutral / disagree / strongly disagree):

  • People support one another in my unit.
  • We have enough staff to handle the workload.
  • When a lot of work needs to be done quickly, we work together as a team to get it done.
  • In this unit, people treat each other with respect.

Following the implementation of the High-Performance Management System, the value prototype team demonstrated positive results. In Year 1, 86% of staff either “strongly agreed” or “agreed” on a metric that combined the responses to the four statements above into a composite measure. A year later, that value was 92.5%. One team member recently commented, “[the] good atmosphere on the ward and good team makes work enjoyable even when there is high patient turnover and sometimes complex patients.” Another remarked on her appreciation of working together as a team: “[We have] good morale and [support] each other.”

These cultural changes coincided with improvements in cost management, productivity, and quality. Six months after the introduction of the box score, the team registered a statistical reduction in agency nursing spending (from an average of £2,278 per week to an average of £1,561 per week). Two months after that, the team registered an overall shift in cost per patient seen, based on a reduction in agency nursing spending, drug spending, and improved patient throughput (from an average of £535 per week to an average of £485 per week).

The impressive productivity improvements merit additional discussion. The value prototype team has seen three different shifts toward improved productivity — the first driven by improved use of nurse capacity to promote increased face-to-face patient time, the second due to the introduction of an improved discharge preparation checklist, and the third due to the introduction of a midday huddle in addition to morning and afternoon huddles, allowing for more proactive tracking of the timeliness of discharge orders. In all, productivity has increased by 32.8% since the start of the project, with the number of patients seen in the unit increasing from 58 to 77 per week.

Cost per patient IHI IHI-HPMS-Pilot-Unit-Cost-per-Patient-Seen-Pounds-I-Chart

The value prototype team has also maintained high-quality care. For example, the team reduced an already lower readmissions rate of 12% to 10%, representing a statistically significant change. Moreover, the team has maintained a low level of patient falls (roughly 2 to 3 per month, mainly controlled falls) and has introduced a set of improvement projects to bring this number down to 0. These improvement projects have focused on greater fidelity to existing fall prevention bundles and have involved a deeper analysis of the time of day during which most falls were occurring, resulting in heightened attention to staffing levels during those periods. The latest data indicate a 27% drop in falls in the past year — from 51 to 37.

Expanding the Model Within NHS Scotland

The health board that commissioned the work (NHS Highland, a regional health system in the north of Scotland) subsequently spread the application of the management system in two consecutive waves, first to 4 additional hospital-based cardiology teams and then to another 9 teams, separated by intervals of approximately 6 months. Several of these teams have shown significant sustained improvements in terms of quality and cost. For example:

  • An endoscopy team reduced late starts from a median of 100 minutes per week to consistently 0 minutes per week.
  • A medical unit in an outlying community hospital reduced the number of patient falls (including mostly controlled falls) from 12 to 7 per month.
  • A pediatric inpatient unit successfully introduced a new standard operating procedure for children’s meals, with the fidelity to the standard increasing from approximately 18% initially to >80% (maintained consecutively for 8 weeks) and then to 100% (maintained consecutively for 7 weeks).
  • A cardiac intensive care unit reduced its cost per admitted patient by 7% by reducing spending on drugs and supplies.

In all, among the 14 teams that have implemented the value-focused version of the High-Performance Management System for at least 6 months, 9 have shown at least 1 statistically significant improvement in terms of quality and/or cost, and some have shown >1 such improvement.

As part of these efforts, the additional teams also periodically received the AHRQ culture survey questions. The cardiac intensive care unit mentioned above had an average score of 94% (“strongly agree” or “agree”) across its two latest surveys (n = 20 respondents). All surveyed teams have had either stable or improving culture scores. One team has not administered the survey.

As with the ambulatory surgery centers, unit leads and quality leads in the test sites in Scotland emphasized the key role of management behaviors in sustaining the system, again reinforcing the importance of the “integration” component of the High-Performance Management System. Middle-level managers routinely attended huddles, asked questions, and provided encouragement. An assigned physician lead helped to address challenges in engaging physicians — particularly specialists and those without significant quality improvement experience. The hospital executive teams were involved in all key decisions in the development of the work, including the selection of teams, the pacing of spread, and relative investment in improvement priorities (e.g., a focus on overall flow and productivity).

In addition to their focus on the weekly management of value, the Scottish teams have now begun work to introduce daily management boards and to evolve existing daily management huddles to include more of a holistic view of performance (rather focusing simply on patient status updates during transitions between staff shifts). In this way, their work has started to resemble that of the ambulatory sites. Taken together, the combination of daily management and weekly management of value offers a powerful set of tools to rigorously manage all aspects of performance.

Key Lessons

Across both the ambulatory surgery and inpatient sites, the teams that showed the most impressive results shared some factors in common:

  • Improvement capability: Successful teams used basic quality improvement methods with ease: they could generate effective run charts with annotations, conduct detailed cause-and-effect and Pareto analyses, and then plan and execute a sequential series of Plan-Do-Study-Act (PDSA) cycles. These different methods reflect part of what is meant by “problem-solving” in the overall management model.
  • Standard work: Successful teams invested significant time focusing on standard work — not only by having checklists and other tools, but also by carving out aspects of standard work for different roles in order to ensure seamless execution. For example, standard work for effective patient discharge likely requires assigned tasks across many different roles: a nurse assistant might assist with arranging the patient’s belongings and family transportation; nurses might lead teach-back activities, communicate with the physician regarding discharge orders, and review safety bundles as a quality check; and a charge nurse might adjust staffing to ensure that others can complete their discharge tasks in an orderly way and also ensure that those in other roles complete their standard work through observation.
  • Leadership: Successful teams had support from several levels of leadership. The most important of these included:
    • Senior executives: Buy-in from the C-suite team (as indicated by such activities as attending huddles, removing barriers, coaching unit leaders, and celebrating success) helps to maintain momentum. Ideally, senior executives have their own measures and visual boards as well as a role in solving problems and executing improvement.
    • Physicians: Having physicians attend huddles and lead their own PDSA cycles helps to drive improvement and engagement.
    • Next-level managers: In the Scottish NHS setting, each team had administrative support from a service manager, who was accountable for issues such as physician scheduling. The active involvement of such an administrator helped to ensure accountability for the frontline team leader. In the ambulatory setting, a senior quality improvement coordinator helped to provide similar support.

An Evolving Approach

The HPMS practices described here offer health systems a way to improve quality and reduce cost, to sustain the results of their systems improvement and change management work, and to improve value through cultural change.

The High-Performance Management System takes significant time to introduce and evolve. Teams must start with a small number of pilot huddles, and the system should ultimately evolve to include huddles, visual management, standard work, and other elements at each level of management. This process represents a long-term organizational journey rather than the strategic flavor of the year.

Overall, the experience to date indicates that, when adopted at a health system level, these management interventions can create a strong set of linkages between otherwise abstract and discontinuous initiatives focused on value, staff satisfaction, and culture change.


References

1. Schein, E. Organizational Culture and Leadership. 2nd ed. San Francisco: Jossey-Bass; 1992.

2. Scoville R, Little K, Rakover J, Luther K, Mate K. Sustaining improvement. IHI White Paper. Cambridge, Massachusetts: Institute for Healthcare Improvement; 2016.

4. Agency for Healthcare Research and Quality. AHRQ Safety Program for Ambulatory Surgery: Final Report. AHRQ Publication No. 16(17)-0019-1-EF. 2017.

4. Mate KS, Rakover J, Cordiner K, Maskell B. A simple way to involve frontline clinicians in managing costs. Harvard Business Review. October 11, 2017. https://hbr.org/2017/10/a-simple-way-to-involve-frontline-clinicians-in-managing-costs

 

 

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Establishing and Sustaining a High Performance Culture: Article #2, The Mechanics of How High Performance Cultures Work

In our last article, Establishing and Sustaining a High Performance Culture, we defined what a high performance culture is and described its four key organizational functions. This article is intended to be more pragmatic in that it will outline the mechanics of cultivating a winning culture.

Before we get into the mechanics, lets talk about the real benefits senior leaders realize by focusing on culture. We will look at these benefits through the lens of a real world example – ANZ Bank. The Australia and New Zealand Banking Group Limited, commonly called ANZ, is the third largest bank by market capitalization in Australia and also the largest bank in New Zealand. In 2008, for the second year in a row, ANZ was named the most sustainable bank globally by the Dow Jones Sustainability Index. They attribute their success in the last decade to their focus on culture. In 2003, the bank implemented an initiative they described as a “unique plan of eschewing traditional growth strategies and recasting the culture of the bank to lift efficiency and earnings.” Their results were significant:

  • In two years, the share of employees having the sense that ANZ “lived its values” went from 20 to 80 percent
  • The share seeing “productivity in meetings” went from 61 to 91 percent
  • Revenue per employee increased 89 percent
  • The bank overtook its peers in total returns to shareholders and customer satisfaction

Ten years later, ANZ has sustained its results. Its profit after tax has grown at a cumulative average growth rate of 15 percent, putting it well ahead of its industry. It announced a statutory profit after tax for the half year ended 31 March 2018 of $3.32 billion up 14% and a cash profit on a continuing basis of $3.49 billion up 4% on the prior comparable period.

ANZ Chief Executive Officer Shayne Elliott attributes most, if not all if their success to its corporate culture. In their half year results of 2018 he reported, “We are now benefiting from a more focused organization with sector-leading capital and improving returns. The progress of our multi-year transformation demonstrates we have the right team in place to manage difficult conditions and deliver for our customers and our shareholders.”

Organizational Culture and Leadership

Culture and Leadership

 

The model illustrated above is the traditional way of viewing how organizational cultures influence the day-to-day environment in which managers and senior leaders operate. It depicts how the collective values, beliefs, norms and customs of the organization determine how decisions are made. Decisions lead to actions. Actions lead to results. The results reinforce the values, beliefs, norms and customs of the culture. In this article, I am going to propose a counter argument regarding organizational cultures that will be a departure from this model. Not only will it challenge the efficacy of the model depicted above, but it may also challenge any predisposition about business cultures you have been educated to adopt. However…after considering its potential value, you will find the proposition at least interesting enough to ponder or test.

We all know how it goes…at the beginning of the fiscal year, senior leaders convene off-site meetings. Along with producing a corporate strategy and a compliment of initiatives, senior leaders often create a set of corporate beliefs and values. They invest a significant amount of thought and time to define and communicate the meaning of these value statements. The hope is that the values will become a code of conduct by which the workforce can operate whenever they are faced with a unique circumstance or an absence of a defined policy. If the workforce operates by the values, they can consider their conduct to be in the company’s interest thereby making them good corporate citizens. This, my friends and colleagues, is a fallacy! Moreover….the posters, speeches and business workshops built around this model not only creates an illusion of corporate culture, but also explains why the expression, “Culture eats strategy for lunch,” is valid.

Organizational Culture: Which comes first the chicken or the egg?

In reality organizational culture resides in how leaders and managers make decisions and take actions. Whether their decision models are used to address corporate politics, problem-solving or improving performance; organizational culture resides in the nature of the decisions leadership makes and actions they take. For example, if leadership values a culture of collaboration but their decisions are made 1. without seeking the pooled knowledge and creativity of a team, or 2. by kicking them upstairs to be made by a select group of senior leaders, then consensus and collaboration are killed in their infancy. If, on the other hand, the senior leaders value managing-by-fact and they use a series of metrics and scorecards to analyze shifts, trends and changes in key performance indicators, then a culture of data-based decision making can thrive.

In conclusion: proposed beliefs, values, norms and customs don’t feed decision and actions. Quite the contrary. The way we make decisions, the decisions we make, the actions we take and the results we achieve, produce and sustain our business cultures.

When TPMG first began training and coaching senior leaders on high performance cultures ten years ago, this theory was met with some skepticism. But….through exhaustive experimentation and analysis, we have found the theory to hold true. We welcome any and all comments.

Whats Next?

Next in this series is The Role of Senior Leadership in Establishing a High Performance Culture.

If you would like the series delivered directly to you, feel free to contact us by clicking here!

Gerald Taylor is the Managing Director of TPMG’s Strategy and Operations Advisory Practice. His expertise includes coaching and advising senior leaders, strategy and performance improvement.

Establishing and Sustaining a High Performance Culture

By Gerald Taylor, Managing Director TPMG

We have heard many definitions for corporate culture. Some academics take an anthropological perspective defining corporate culture as a system of company values, beliefs, norms and customs. Anthropologists believe it is culture that shapes the identity of society. They conclude culture determines how members of the society dress, what they eat, how they worship and overall how they govern themselves. By the same token, a business culture shape the identity of a corporation. It determines how company employees work, how they set priorities and accomplish goals. In effect, corporate culture is the day to day climate that absolutely plays the dominant role in determining the success of the firm. But what is a high performance culture?

At TPMG Consulting we define a high performance culture quite simply as:

The collective and consistent individual decisions and organizational practices that systematically pursue and obtain higher levels of individual and overall productivity. A high performance culture is the collection of decisions made and actions taken which deliver improvements in results and value. Based on research from TPMG analytics, companies with high performing cultures possess an intense, almost religious focus on four key organizational functions:

  1. Service: there is a fanatical commitment to meeting the needs, attitudes and perceptions of customers.
  2. Workforce Engagement: the terms and conditions upon which people and functions relate are very well defined and integrated.
  3. Performance Analysis: leaders review, analyze, share and improve performance using data and analytics.
  4. Leadership: management creates and maintains formalized methods and practices that promote and reinforce measurable improvement.

Like a genome, high performance cultures can be both dominant and recessive. This means high performance cultures literally exist on a continuum within organizations.

culture

Why does a High Performance Culture Matter?

Before getting into the mechanics of cultivating a winning culture, it is important for all senior leaders to first understand the benefits of a High Performance Culture.

A recent Gallup study uncovered several insights. They concluded high performance cultures inspire high commitment from employees. Their study revealed that companies with a favorable culture attracted and retained talented employees at a measurably higher rate and their employees were more easily inspired to consistently deliver on their organization’s value proposition.  Favorable cultures improve performance. Among US healthcare systems, when 8 in 10 of their employees feel connected to their organization’s mission and purpose. They realize a 41% reduction in absenteeism, a 50% drop in patient safety incidents and a 33% improvement in quality. According to a McKinsey & Company study (2013), a favorable culture is a key predictor of revenue, profits, costs and quality of customer service. The bottom line is……employees and teams who most align with their organization’s culture consistently perform higher on internal performance metrics than those who least align.

The Leadership Challenge: Culture Eats Strategy for Lunch!

We all know how it goes…. At the beginning of the fiscal year, senior leaders convene off-site meetings. The goal is to set the stage so the accomplishments for the coming year will out perform prior year’s results. They reflect on organizational performance and most always believe they can achieve more.

For the most part leaders know their business. The know their competition and are experienced enough at formulating winning strategies. Every year they go big and expect things will be different……but the results usually end up falling short of expectation. What continually frustrates their success is their company culture. No matter how much they plan, implement policies, or how many consultants they engage…..their day-to-day climate limits their potential. The one true lesson in both business and government is – culture eats strategy for lunch!  This subject is what the coming series of articles is all about: How to Establish and Sustain a High Performance Culture. 

In this series, we will provide real world examples of why high performance cultures matter. We will break down the organizational climate and discuss the mechanics of how cultures work and share proven practices we have applied over the past 15 years.

If you would like the series delivered directly to you, feel free to contact us directly by clicking here!

Gerald Taylor is the Managing Director of TPMG’s Strategy and Operations Advisory Practice. His expertise includes coaching and advising senior leaders, strategy and performance improvement.

Jack Welch on Employee Performance

Jack Welch on Hiring Talented People

Jack Welch on “Strategy, Execution and People”

Change Management and the Workforce

Gerald Taylor – Managing Director

TPMG Consulting

The purpose of this article is to provide context and insight relating to the topic of organizational change. It is our hope that it provides you the background and perspective you can use to stimulate creative thought and support your change management activities.

I have drafted 6 important questions to address major questions that relate to change management. This article provides concise responses, based on sound primary and secondary research. The questions and responses are as follows:

  1.  What is change in the business context?
  2. What is the most important thing to know about change and employees?
  3. Why do employees fear or resist change?
  4. How does a change agent overcome resistance to change?
  5. Why do employees remain with companies?
  6. What can companies do today to satisfy and retain quality employees?

The body of this article will provide analysis and conclusions from prevailing management literature and from TPMG’s consulting practice. Should you have any additional questions, feel free to contact me directly at info@helpingmakeithappen.com.

CHANGE IN THE BUSINESS CONTEXT

What is change in the business context? A business context is the strategy, structure, procedures, technology, systems, and objectives employees function within.  Organizational change involves altering or transforming the business context or significant portions of the business context from its present state to some future condition. Appropriate drivers of change to the business context include:

  • Changes in Strategy: Shifts in direction and resources toward new business or market opportunities.
  • Changes in Technology: Advances in internal operations for the sole purpose of improving cost, quality or operational productivity.
  • Changes in Structure: Improvements in the hierarchy to improve the speed, quality and efficacy of decisions and actions.
  • Changes in Culture: Counter measures undertaken to rid negative attitudes or behaviors that serve no useful purpose.

What ever the change, it can be likened to a rock being tossed into still waters. Change can cause ripple effects throughout an organization, often with unintended consequences.

THE SIGNIFICANT THING TO KNOW ABOUT CHANGE AND EMPLOYEES

What is the most important thing to know about change and employees?  Change to the business context is disruptive and produces stress for employees. The introduction of new ways of performing a task can produce intellectual and emotional strain. New technology or procedures establish new learning curves for employees.  Changes to the business context can also introduce new relationships into the work environment. When this occurs, storming and interpersonal conflicts between employees create sources of stress.  Regardless of the reasons or the intensity of a change, the impact of the change causes stress. . A common reaction to organizational change is resistance from those whose jobs may be directly impacted.   Management must be certain that the benefits of the change are worth the cost of the tension placed on the employee.

FEAR AND RESISTANCE TO CHANGE

Why do employees fear or resist change? Employees fear and resist change simply because they will be asked to do something new. This is even more true for older, more experienced employees.  These veterans of the workforce can resist change because they are more intellectually and emotionally invested in the current context to accommodate a change. Younger employees, however, may be more comfortable doing their job with a new twist.

Change for middle managers and supervisors can cause a loss of power or diminished influence in their sphere of responsibility – so they will resist. Additional reasons for fear and resistance to change are illustrated in the force field analysis in figure 1.0.

Figure 1.0 Change management

OVERCOMING RESISTANCE TO CHANGE

How does a change agent overcome resistance to change?  The first step in successfully implementing a change to the business context is communicating a solid and compelling business reason for the change.   Management must be certain that the need to change is greater than the need to stay the same.  Employees need to know that the change is either provoked by a threat to the business or by an added value that will simplify their daily efforts.  If employees perceive a change will be worth the effort, they can be persuaded to “do the right thing.”  Before introducing a change to the business context, management must be prepared to ask and respond to tough questions.  They must ask themselves:

  • What is the reason for the current policy, procedure or system we want to change?
  • What will happen if the current policy, procedure or system is changed or eliminated?
  • How do we minimize the risk of doing away with the old and installing the new one?
  • What is the link between what we are proposing and the company’s strategy?
  • How can I address the concerns of those attached to the old way of doing things?

It is imperative that management not only have a solid business reason, but also a solid moral argument for change.  For example, a utility company often uses their field service technicians, who typically perform sophisticated maintenance work, to perform low skilled tasks because it provides the service techs with a break from the hard work of the day.  The company’s senior management team decided to create a lower skilled, lower paid job category to specialize in performing the lower skilled duties.  This change was preceded by a pilot study which found matching higher skilled work with higher skilled employees and lower skilled work with lower skilled employees increased the overall service order productivity 60% while reducing operational cost by more than 35%.  Senior management’s business reason was solid.  Their moral argument was articulated in terms of the employees’ long term financial needs.  Senior management argued that this improvement in productivity would save the company more than 1 million dollars a year.  These savings, over time, will increase the value of the company and thus each employees’ investment in company stock.  They conveyed that the long term value of the company and financial security of employees was greater than the need for some employees need to “take a break” during the day.

Additional prescriptions for overcoming resistance to change include:

  1. Demonstrate Leadership:  Employees respect strong, smart and effective leadership.   The leaders should create, in the mind of the affected group, a tangible picture of the future state of the business context and the reasons why.
  2. Create options for those adversely affected by the change: A workforce trusts a management team who looks out for their employees.  If management takes care of their people, their people will take care of them.
  3. Over Communicate:  Employees respond effectively when they know what, why and how they will participate in the change. Communicate, in as many modes as possible, the true need and the logic behind the change.  Over communicate!
  4. Move slow, as much as time permits:  Employees who do not feel out of balance when change comes will be better positioned to help facilitate the change.

Think about when cities construct stop lights in new intersections.  They first erect the post.  Four weeks later they connect the stop lights (non working).  Weeks later they turn on the lights, but blinking, to serve as caution lights.  Then weeks later, they make the stop lights functional.

  1. Provide Resources:  Ample resources are of particular importance if the change involves moving to a more sophisticated system.  Management can head off much resistance by committing enough resources to train people to use new technology.
  2. Manage the change:  Employees trust and respect a management team that can create and professionally execute a change plan.

A final strategy for implementing change, we recommend only as a last resort.  Mandate compliance to the change.  Such a coercive action often happens when change must come quickly or when change is undesirable to the affected group.  Pressing or forcing change can increase resistance to change, making the manager or change agent’s job more difficult.  Managers and change agents sometimes have no choice but to force change onto an affected group.

RETAINING A SATISFIED WORKFORCE

Why do employees remain with companies?  Retaining a hardworking, motivated workforce is not a difficult matter.  As a manager, one merely needs to understand the sources of employee dissatisfaction, the sources of satisfaction and respond accordingly.

To that end, a company can be guided by theory.  In the 1950’s, Frederick Herzberg proposed the most relevant theory of employee motivation – Herzberg’s Two Factor Theory of Motivation.  His theory implied that a satisfied employee is motivated from within to work harder and a dissatisfied employee is not self-motivated4.  Herzberg’s research uncovered two classes of factors associated motivation – employee satisfaction and dissatisfaction.  These factors are outlined in table 1.0.

Table 1.0 Herzberg’s Two Factor Theory of Motivation

Dissatisfiers:

Factors Mentioned Most Often by Dissatisfied Employees

Satisfiers:

Factors Mentioned Most Often by Satisfied Employees

1.   Company policy and administration 1.  Achievement
2.   Supervision 2.  Recognition
3.   Relationship with supervisor 3.  Work itself
4.   Work Conditions 4.  Responsibility
5.   Salary 5.  Advancement
6.   Relationship with peers 6.  Growth
7.   Personal life  
8.   Relationship with subordinates  
9.   Status  
10. Security

Herzberg developed a list of dissatisfiers by asking a sample of 200 employees to describe job situations in which made them feel exceptionally bad.  Herzberg’s research revealed dissatisfaction tended to be associated with complaints about the job context.  He then asked the same sample of 200 employees to describe job situations in which made them feel exceptionally good about their jobs.  His survey concluded that satisfaction tended to be focused on the nature of the job itself.  The responders articulated that the opportunity to experience achievement, receive recognition, work on an interesting job, take responsibility and experience advancement and growth was at the top of their list.

What Herzberg concluded in the 1950s still has relevance today.  By insisting that satisfaction is not the opposite of dissatisfaction, he encouraged managers to think carefully about what actually motivates employees.  The implications are simple to understand.  By providing competitive pay, good working conditions, and the like, a company can, at best, eliminate dissatisfaction.  A workforce requires interesting, meaningful, and satisfying work to be motivated.

Unfortunately, many corporations and executives see things differently.  A job factor survey from 1993 asked a sample of employees to rank certain facets of their job in order of importance.  The survey then asks the same of a sample of managers and executives.  The results are listed in table 2.0.

Table 2.0 Contrast of Employee and Manager Ranking of Work Factors

Factor Employee Rating Manager Rating
Interesting Work

1

5

Appreciation

2

8

Involvement

3

10

Job Security

4

2

Good Pay

5

1

Promotion/Growth

6

3

Good Working Conditions

7

4

Loyalty to Employees

8

7

Help with Personal Problems

9

9

Tactful Discipline

10

6

This study published the Advanced Management Journal found if managers hope to be successful at motivating their employees, they must align their actions closer to those factors that their employees think are important.

What can companies do today to satisfy and retain quality employees?  One of the most altering decisions an employee can make is to change companies.  If companies lose good employees, 9 times out of 10, they deserve it.

Companies should first do their best to eliminate all sources of dissatisfaction:

  1. Employees will stay with a leadership team they can trust.  Supervise employees fairly and nurture good relations between managers and their employees.
  2. Employees will stay with a leadership team they respect.  Manage and administer the company’s policies, procedures and resources with professionalism.
  3. Most employees will put forth a good faith effort if they are being paid fairly for the value of their effort. Pay competitive wages and compensation.
  4. Provide life time employment.  If employees don’t have to worry about their future with the company, they can concentrate on becoming more competent and productive.
  5. Provide an environment that is safe and an environment that has the resources for employees to get their job done well.

These steps should go a long way toward eliminating dissatisfaction.

In order to encourage job satisfaction and employee retention, companies should do their best to provide the following:

  1. Provide work that has identity in the workplace and significance to the value chain.  Jobs which directly relate to generating profits, (i.e., customer service, field services, billing, collections) are all value creation jobs with identity and significance to the financial health of the company.
  2. Seek advice and council from employees regarding changes.  Management may learn hidden details of the business, and employees feel important and appreciated for their input.
  3. Provide employees with feedback about their performance.  Employees want to know that they are making a contribution to the success of the business.

Provide training and employee development.  If employees believe a company is interested in their future success they will be interested in the future success of the company.

 

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