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From Leaders to Leadership: Managing Change

February 28, 2005 

"The increased visibility of business leaders in the modern economy has created a new form of social theater.  In it, highly publicized corporate leaders - a new cast of management celebrities - drive organizational change, boldly and purposefully, either to fame or (no less conspicuously) to failure.  Paradoxically, while the relative value of the once-celebrated individual leader is being questioned, effective corporate leadership has never been more urgently in demand or, arguably, more difficult to achieve.

Leadership neither begins nor concludes with simple, bullet-point lists of 'good leadership qualities.' Many discussions of leadership - particularly clichéd lists of obvious corporate realities - actually inhibit effective leadership when it comes to discerning the need for, and implementing, cultural change.  Arguably one of the most recent successful of high-profile organizational and cultural change is the turnaround affected by Lou Gerstner, Jr. at IBM.  For decades, IBM employees accepted that a sales-and-marketing orientation, as opposed to a customer-needs and product focus, was what propelled growth.  IBM achieved its transformation by jettisoning its internally protective culture and becoming externally focused on customers and competitors - in effect by systemically facing up to, and overcoming, the corporations collective fears.  As organizational psychologists Kegan and Leahy (2001) posit, cultural change can e difficult because of deeply help apprehensions that they describe as 'competing commitments.'

The convergence of a series of contemporary forces - the globalization of markets, the increasing rates of competitive pressure, and the flattening of organizational structures - has increased the distinction between leadership and management (Steingraber, 1996).  The differentiation can be characterized as follows.  Management is based on 'process,' in that it focuses on maintaining systems to provide goods and services efficiently.  The elements of management therefore create predictability in anticipating future developments and assessing on-going operations.  Leadership, on the other hand, is prospective: it defines what the future should look like, aligns the organization with a common vision, and provides inspiration to achieve transformational goals (Kotter, 1990; 1996).

Good and Campbell (1987) found, that idea corporate management implicitly integrates leadership and management.  Thus, as business dynamics and contexts change, corporate leaders must adapt themselves fundamentally in order to maintain an effective integration of the leadership and management roles, and some form of equilibrium between the simultaneous expectations held of them: of strong central direction coexisting with unit-level autonomy; and of central long-term strategic thinking coexisting with a measure of tactical flexibility and freedom of action among subordinates.

In achieving this equilibrium, responsiveness to context is key.  Farkas and Wetlaufer (1996) studied 160 chief executive officers around the world to determine the attitudes, activities and behaviors that shaped their respective leadership approaches.  The authors concluded that CEOs in successful companies tended to adapt their leadership approach to specific strategic situations, rather than sticking with any single approach. 

Moran and Avergun's definition (1997) of change management provides a starting point, defining it as 'the process of continually renewing the organization's direction, structure, and capabilities to serve the everchanging needs of the marketplace, the organization, and employees.'  Hannan, Polos, and Carroll (2002) explored the social phenomena behind why organizations experience powerful inertia when it comes to the realization of change. 

As we have seen, the high failure rates of change-management initiatives indicate the difficulty and complexity entailed in the successful realization of any process of change.  In a study of 40 major change management programs, LaClair and Rao (2002) found that 58% failed and 20% captured only a third or less of the value expected.  Conversely, Kotter (1998) contends that four key mistakes impede change initiatives: complacency; not communicating with words and actions; celebrating too soon; and assuming that all middle managers are against change.   Other explanations for failures in managing change include the development of a selection process that favors seniority, promotion of new managers without proper training, and hiring of similar managers as successors (Useem, 2002). 

Indeed, change management is a difficult balancing act precisely because it requires companies to combine both incremental and revolutionary change in order to achieve what can be termed 'dynamic stability' while avoiding the related perils of organizational cynicism and burnout (Abrahamson, 2000).  This in turn, has implications for which the process of change can be conceptualized (and applied) within the corporate context.

The authors of this article present a case study of a complex change initiative at a highly innovative company in the biotechnology filed, Genentech, Inc., serves to illustrate many of the aspects that have been reviewed here: not only areas of resistance, but also the characteristics and internal dynamics that allowed the company to build its flagship product from relatively small beginnings into the best-selling cancer therapy in the U.S.  After experiencing great success, the company experienced a shift in the sales growth and from outside competition.  After a series of internal reviews, the need for change within several areas of the company became apparent to all concerned.  First, the marketing team's structure was too general and with individual roles unspecified.  In addition, the sales group was understaffed to the point that it was unable to research and monitor it own activities. 

The first step was to identify the need for change - and the urgency with which it was required - by engaging the entire operation in dialogue.  This had to be done at two levels: both cognitively and emotionally, each member of the team needed to acknowledge and internalize the fact that the business landscape was altering as a result of innovations.  Next, multiple modes of communication created transparency and initiated candid feedback. Beyond these questions of morale and personal fulfillment, a further study was instituted in an effort to identify the 'cultural norms; - the workplace culture - that prevailed within the Hematology business unit.  The method employed for this was a series of confidential individual interviews, focus groups, and finally a survey of the entire business unit to confirm findings.  The survey showed a high degree of consensus as to Hematology's workplace culture including these key themes: making a difference in patients' lives; pride in being science-led; and emphasis on speed of execution and performance; mutual respect and trust among co-workers; belief in individual empowerment; and a tradition of collaborative decision-making. 

The accelerating pace of globalization, communications, and technological innovation; the changing patterns of cross-border capital flows; the fluid state of corporate mergers and partnerships; all these have created - and will continue to create for the foreseeable future - fundamental shifts in the ways in which business is conducted.  The task of discerning external change and translating that discernment into strategies for internal corporate change - in terms of evolving organizational structures, group culture, and styles of personal interaction - stands as one of the most enduring challenges of leadership.  The case of the Genentech Hematology business unit illustrates a successful instance of discernment of the need for change and the effective implementation of a response to that need (Ahn,  Adamson, & Dornbusch, 2004, p. 112-123)."

Reference:  Ahn, M.J.; Adamson, J.S.A.; & Dornbusch, D. (2004).  From leaders to leadership: managing change.  The Journal of Leadership and Organizational Studies, 2004, vol. 10, no.4.

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Created: 2007-08-28, Updated: 2009-02-17