Change Management: Altering Mindsets in a Global Context

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V. Nilakant & S. Ramnarayan

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    List of Tables

    • 1.1 Change Need Analysis 34
    • 2.1 Percentage Changes in Births and Deaths 1988–1998 56
    • 2.2 Transition of Firms 1995–1998 57
    • 3.1 Evaluating a Business Model 128
    • 4.1 Four Approaches to Change 138
    • 4.2 Six Principles of Persuasion and Related Change Management Tactics 158
    • 4.3 Core Tasks for Mobilising Support
    • 4.4 Techniques for Framing 170
    • 6.1 Accelerating Decisions in High-uncertainty Environments 258
    • 6.2 Distinguishing Features of Purposeful and Distracted Managers 263
    • 6.3 Factors that Lead to Recognition and Ownership of Problem 272
    • 6.4 Components of Capability Building 297
    • 7.1 AI Interview Guide 315
    • 7.2 AI Summary Sheet 316

    List of Figures

    • 1.1 Change Management Model 30
    • 1.2 Four Leadership Roles in Change Management 51
    • 2.1 Distribution of organisations by Size in New Zealand in 1996 56
    • 2.2 Real GDP Growth: US with Recession 61
    • 2.3 US Economy: Real GDP Growth Rate Across Time 61
    • 2.4 Indian Economy: Real GDP Growth Rate Across Time 62
    • 2.5 Growth in Industrial Production SSI Sector at 1993–94 prices 63
    • 2.6 US Economy: Capacity Build-up and GDP Growth Rate 64
    • 2.7 US Economy: Capacity Build-up and Producer Prices 66
    • 2.8 Life Cycle Stages of Industry Evolution 70
    • 2.9 Factors Shaping the Change Agenda 93
    • 3.1 Managing Change: Impact and Magnitude Grid 101
    • 3.2 Dominant Model in the PC Industry 125
    • 3.3 Dell Direct Model 125
    • 4.1 Sample Commitment Chart 168
    • 5.1 Four Types of Change 192
    • 5.2 Factors Contributing to Non-Collaboration 217
    • 5.3 Effect of Purpose and Processes on People 234
    • 6.1 The Focus–Energy Matrix 261
    • 6.2 Components of Capability 301

    List of Boxes

    • 2.1 Cost Advantages from Flexibility in Plant Capacity 68
    • 2.2 Market Knowledge as Source of Responsiveness and Pricing Power 69
    • 2.3 Digital Music and iPod Phenomenon 82
    • 2.4 Strategic Change in Mobile Phone Industry 83
    • 3.1 Senge's Five Disciplines 112
    • 3.2 The Two Column Approach to Uncover Defensive Routines 117
    • 4.1 Getting Oscar to Eat Lunch 142
    • 4.2 When ‘Push’ Strategy Pushed the Issues Underground 145
    • 4.3 Communicating to Delhi Residents and Gaining their Support 160
    • 4.4 Malaysian Carpet Company 161
    • 4.5 Crisis and Credibility 163
    • 4.6 Balancing Consideration and Closure in Decision-Making 174
    • 4.7 Unclogging the Communication and Involvement Channels 176
    • 4.8 Resolving a Tangle during Presidential Campaign 181
    • 5.1 Reinforcing Commercial Focus in Day-to-Day Interactions 221
    • 5.2 Unlearning Mindset of ‘Beneficiary’ and Learning to be ‘Entrepreneur’ 222
    • 5.3 New Behaviours Resulting from Manthan235
    • 5.4 Summary of Points for ‘Strengthening Action Plan’ and ‘Evolving Communication Plan’ 236
    • 5.5 Deconstructing the Goal of ‘Reduction in Purchase Costs’ at Nissan 240
    • 6.1 Sample of Performance Achievements Resulting from ASPIRE 250
    • 6.2 What Factors Contribute to Self-Efficacy? 257
    • 6.3 How Mindset Inhibited Learning at J & J 278
    • 6.4 Transfer of Best Practices at GE 281
    • 6.5 Seven Elements in Questioning 285
    • 6.6 Hearing the Unheard 285

    Foreword

    TODAY INDIA stands at significant crossroads of development and growth. In the last 20 years the country has witnessed sustained economic growth that has brought, in its wake, increased prosperity and a sense of confidence to many of its citizens. Thanks to the revolution that began with information technology, India has emerged as a key player in the global economy. Indian companies are poised for global expansion through foreign direct investments. India is emerging as a major hub for manufacturing and export of automobile parts and accessories, textiles, pharmaceuticals, leather goods and machine tools. Indian companies are now major players in a global market.

    Although, as Indians, we can be proud of the tremendous progress we have made, we still have a long way to go. When India became independent in 1947, we set ourselves the mission of eradicating poverty, ignorance and disease that had kept us backward. That mission remains to be accomplished. We need to grow at the rate of eight percent or more annually over the next ten to 15 years. Specifically, we need to modernise our infrastructure in a radical way. We need massive investments in education to build the human capital that will fuel our progress. We need substantial changes in primary and secondary education. We also need huge improvements in healthcare, particularly in the areas of primary and rural healthcare.

    All this will require an enhancement of our ability to execute decisions and implement changes. We need new ways of thinking, working, engaging and interacting to build organisations that will help us achieve our goals. Both public and private organisations need to learn new ways of engaging with people and communities in the management of change. The framework of managing growth and change in a dynamic environment presented in this book draws on current research in the social sciences and combines research findings with the practical experience of the authors. The illustrative cases drawn from different sectors and industries highlight the specific leadership challenges of paying attention to mental models both outside and inside the organisation; gaining support for the idea of change; creating right structures, processes and coordination mechanisms for effective execution; and getting people to believe in their own ability to master challenges.

    The authors of this book were involved in change management programmes conducted for ministers in the Indian government and civil service officers, with whom I was closely associated under the leadership of Shri Rajiv Gandhi in the 80s. Their ideas on change management were initially developed when they worked with the Tata group of companies at the Tata Management Training Centre, Pune. The authors have vast experience in working with private and governmental organisations in India and abroad. They do not offer a formula or a do-it-yourself kit for bringing about change. They remind us that growth, development and change require shifts in our mindsets and mental models. More importantly, sustained progress demands that we commit ourselves to making tough choices and implementing them.

    Systematic frameworks such as the one offered in this book can significantly benefit managers and others struggling to cope with the challenges of change. We need all the knowledge and insights that we can get to achieve the demanding goals that we have set for ourselves. I am confident that this book will be an important contribution to our knowledge of how to manage change in increasingly demanding times.

    P.Chidambaram Finance Minister Government of India

    Preface

    THIS BOOK was originally conceived as the second edition of our previous book Managing Organisational Change, written in the aftermath of liberalisation initiated by the Indian government in 1991 and published in 1998. Based on primary data from about fifty Indian organisations in a variety of industries, it examined the challenges of growth in an emerging, liberalised competitive environment. We viewed organisational change as comprising three generic processes of growth, transformation and decline. We suggested that these three processes differ from one another in certain crucial respects and, therefore, required different approaches to manage the same. We argued that it was important for managers to know which generic process they are managing in order to be effective. We presented a model of the levers of change that provided an integrated approach to the management of change. Our generic model specifically focused on eight tangible levers of change: values-based leadership, strategy, structure, human resource practices, technology, marketing, quality, and costs. While the model was illustrated with examples from the best of Indian and international practices, the book emphasised both what organisations need to change and how they should go about it. It suggested that the effective management of change involves managing intangibles, particularly positive values such as selflessness, justice, compassion, tolerance, respect and integrity.

    Our previous book was not only about how to manage change, but it also sought to celebrate the success of Indian organisations in a competitive environment. We noted that India was poised on the threshold of a major transformation. Following the liberalisation of the Indian economy in 1991, Indian businesses were exposed to the realities of both domestic and global competition. Many expected indigenous businesses to struggle for survival in the wake of deregulation and increased competition. However, we argued that Indian organisations' response to these changes had been positive and vigorous; presenting lessons from their experiences of managing change. We believed that these lessons were universal and important for those managing organisational change in any part of the world.

    Soon as we began to work on a second edition of Managing Organisational Change, it became apparent that the book needed more than just a revision. Both, India and Indian organisations had come a long way since that book was published. For instance, Infosys, one of the cases that we had discussed in our previous book, is now a global player with a turnaround exceeding a billion dollars. The Indian software industry has grown rapidly since early 90s, at an average compounded annual growth rate of around 40 per cent. Today, it is a global industry catering primarily to markets in North America and Europe. The World Bank rates India as a leading outsourcing destination for software services. Our ideas on change management were initially developed when we worked with the Tata group of companies at the Tata Management Training Centre in Pune, India. Currently, the turnover of the Tata group of companies is equivalent to about 3 per cent of India's GDP. With a touch of pride, we note that some of these companies have achieved global excellence in their areas of operation. In its 2005 ranking, the World Steel Dynamics rates Tata Steel as the world's best steel company. Tata Consultancy Services, India's largest IT services company operates in 33 countries and has a turnover of more than a billion dollars. Tata Motors' silver prototype of a sports utility/saloon crossover vehicle was one of the stars of the recent Geneva motor show. In our previous book we noted that according to a World Bank forecast, by 2025, India would be the world's fifth-largest economy. Today many expect it to be the third largest by that period.

    In spite of its tremendous achievement since 1991, we believe that India has a long way to go before it can claim to be a credible global power. Our vision of India is a country with 100 per cent literacy, in which every village has a road, drinking water and electricity; where all its citizens have access to good health care and whose children have had at least ten years of basic education. We also believe that this is feasible by 2020. To achieve this vision, Indian organisations would be required to manage change in a challenging environment. In this book, we present a model to address this challenge of change.

    While Change Management builds on the ideas from our previous book, it is different in two significant ways. First, it is less about India and more about change management in a global context. We discuss global best practices in various facets of change management. Second, the model of change management that we present in this book is based not on case studies but on current research and ideas in change management.

    In our model of change management, we identify four core tasks that are crucial to the success of any change initiative in organisations. These are: appreciating change, mobilising support for change, executing change and building change capability. We contend that change initiatives that fail to achieve their objectives do so because they fail to effectively manage one or more of these. While the model is based on theory and research, it also offers a practical approach to managing change. In particular, we caution managers against action without reflection, energy without focus and competitiveness without compassion. We suggest that effective management of change is about balance – between short-term and long-term, profits and people, overview and detail, continuity and transformation, reality and imagination, hard-nosed business savvy and soft-hearted dreams, and between what is feasible and what is desirable. We argue that organisational change is inherently complex and warn against adopting simplistic recipes. We have presented our model to several groups of managers. The positive responses we have received indicate that the model is relevant, valid and practical.

    The most significant message we would like to offer through this book is that organisational change is not about restructuring, reorganising, merging or downsizing. It is not about six sigma, total quality management or lean production. Fundamentally it is all about changing the ways in which people think and act in an organisation. It is about altering mental models and mindsets. We believe this to be core task of change managers and leaders; and suggest practical ways in which this can be brought about in organisations. We believe that managing change in organisation is about: (a) tuning to the external environment and people's mindsets inside the organisation, (b) influencing and persuading people and strengthening communication, (c) architecting change through cross-functional collaboration and challenging goals, and (d) creating positive contexts that enable people to: have faith in their own capabilities, experiment, take risks and learn.

    We are grateful to the Honourable Union Finance Minister, Government of India, Shri P. Chidambaram, for contributing the ‘Foreword’ for this book. We have had the privilege of knowing him since he involved us in designing and conducting a series of change management workshops for ministers and senior civil service officers in the mid-1980s. We were keen to have him write this ‘Foreword’ as it provides affirmation and continuity for an inquiry into change management issues that commenced in 1984, when we became involved with the change initiatives that began in India during the same period.

    A number of people in India and New Zealand have contributed to the completion of this book. Besides the many organisational leaders who were generous in sharing with us their experiences, ideas and insights; we are particularly grateful to: Chapal Mehra, Response Books, for his patience and persistence in nudging us towards completion; Prof. Anil Sood for generously devoting his time and energy to go through the manuscript and providing critical inputs; Dr. P. K. Mohanty, Director General of the Centre for Good Governance, India, for being a source of constant inspiration and encouragement during the book-writing project, Kiran Kumar for providing high quality research help; and Jo Jordan, Peter Cammock, Ian Brooks, David Ripley, Bob Hamilton, Irene Edgar and Irene Joseph in New Zealand for their unstinting support.

    V.Nilakant September 2005
    S.Ramnarayan

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