We next turn attention to another type of resistance which we shall call systemic. The two types of resistance are concurrent during the history of a change and they produce similar effects: delays, unanticipated costs, chronic malperformance of new strategies. But, the basic causes are different. One comes from active opposition to change and the other from the passive incompetence of the organization.
Duality of Organizational Activity
- 1.
To succeed and survive in the near-term, they must make their products/services attractive to their customers. In the firm, this means efficient manufacturing, effective marketing, efficient distribution, reliable after-sales performance, etc.
- 2.
To survive and succeed in the long-term, firms typically seek to increase and expand their market penetration through aggressive competition, expansion of capacity, investment in improved production technology.
This activity, aimed at assuring both the current and the future profitability of the firm’s historical lines of business, has been named the operating activity by some writers, competitive activity by others. As noted earlier, during the first half of the twentieth century, the competitive activity absorbed the bulk of the budgets and of managerial attention. It was highly productive, because the environment offered what appeared to be unlimited opportunities for growth.
During the first half of the twentieth century, growth horizons became increasingly limited. As a result, firms turned their attention to a second activity, called strategic activity, aimed at changing their historical business through development of novel products, entry into previously unserved markets, diversifying into new businesses and new technologies.
During the second half of the twentieth century, strategic activity received only a minor portion of the budget and of managerial attention. Typically, it was confined to incremental product modifications; major strategic discontinuities were regarded as once-in-a-lifetime upheavals, to be dealt with whenever they arose.
During the second half of the twentieth century, preoccupation with the strategic activity grew progressively and, with it, the strategic budget grew to a point where strategic activity became a serious competitor for management attention.
Strategic Capacity
As the preoccupation with strategy grew, the operating problems did not slacken. On the contrary, the intensified competition and development of global markets in the twenty-first century made them more challenging and complex. Therefore, the total demand on management time grew rapidly.
Whenever the new strategy required new technological or marketing or production know-how, the need for new production capacities was readily perceived and accommodated. But, curiously, the need for new managerial capacities was neglected and increases in the strategic work were ‘dropped’ on top of the expanding operating challenges, thus creating an overload on the management system.
For example, during the introduction of strategic planning, it is typically standard practice to add the very substantial amount of the new planning work to the other responsibilities of the already-pressed managers. Since in medium or large sized firms a typical planning cycle takes at least seven months of each year, the new workload was, to all intents and purposes, continuing and substantial.
When the results of planning needed to be implemented, strategic projects were similarly assigned as ‘extracurricular’ activity to line managers and other personnel who were already loaded with operating concerns.
Predictably, in the absence of adequate capacity, something had to give, and in most cases, it was the strategic activity that gave precedence and priority to the operating work. So, typical was this behavior that Herbert Simon, one of the great researchers in the behavior of organizations, formulated ‘Gresham’s Law of Planning’ which states that routine, repetitive, and historically familiar operating activities tend to displace novel, episodic strategic activities.
The resulting shortage of capacity for strategic work predictably affects the results. Deadlines are slipped, strategic planners developed ‘planning fatigue,’ strategic projects suffered from slipped schedules and cost overruns, and many disappeared ‘down the chute’ within the organizational maze.
- 1.
Whenever both operating and strategic work compete for management attention, the former drives out the latter.
- 2.
At any given time, systemic resistance will be proportional to the difference between the capacity required by new strategic work and the capacity available to handle it.
- 3.
Whenever the strategic budget is increased significantly, without an accompanying increase in the managerial capacity, the strategic overload will cause delays, cost overruns, and strategic project failures in proportion to the speed with which the strategic budget is builtup.
At first glance, it appears desirable in the near term, while the strategic capacity is being developed, to reserve some of the operating capacity to the strategic work. But this solution is likely to rise, rather than lower, the resistance; the reason being that operating units are poorly equipped to perform strategic work.
Operating vs. Strategic Capability
Alongside the implicit assumption that management capacity is elastic enough to absorb major increases, another implicit assumption has been that general management capability is universal, and that a capability developed for solving operating problems is applicable to the strategic work. For example, it has been assumed that successful managers of growth and profitability can instantly become effective entrepreneurs. Yet, our discussion shows this is not the case.
The Comparison of Capabilities summarizes the typical management capability profiles needed for effective support of, respectively, strategic and operating work. An examination of the figure readily shows that the operating capability profile is geared to support profit making, efficiency-serving, change-controlling behavior. By contrast, strategic capability supports investment in future profits (and thus incurs current loss) through generation of change.
As depicted in the figure, all six components of capability are not only different, but frequently contradictory. Thus, the typical operating incentive system, which reward historical and current performance, would suppress strategic activity, which depresses profits in the short term. A manager skillful in current profit making would be reluctant to take risks on novel ideas and would lack skills in managing strategic projects , as well as in managing creative people. The long-range planning and control system of operations management would not be capable of identifying and evaluating novel opportunities, nor of controlling strategic expenditures. The reader can readily see for himself how the operating information system, organizational structure , and power structure would similarly act to suppress strategic activities.
The Comparison of Capabilities helps explain the rejections, inefficiencies, and delays which occur when strategic tasks are imposed on the operating capability. Further, the figure suggests that these inefficiencies will be due not only to cultural/political rejection and overload, but also to inapplicability of operations management skills to strategic work. Thus, forcefully borrowing operating capacity for strategic work does not solve the problem, unless the borrowed managers and their staffs are already trained in strategic decision making, implementation, and control.
When the strategic budget becomes large and strategic work important, additional capacity will, of necessity, have to be built. But because of the Gresham’s law phenomenon, the expanding operating priorities will continue to preempt the new capacity, unless dear-cut managerial arrangements (through job definitions and possibly structural change) are made to protect the strategic activity.
- 1.
If strategic work is assigned to operating units, without developing their strategic capabilities, the strategic incompetence will compound the priority conflict and the overload.
- 2.
Unless new capacity, which is added to accommodate growing strategic work, is dedicated to this work and protected from operating priorities, there will be a tendency to preempt the new capacity for operating concerns.
- 1.
Priority conflict which suppresses strategic activity in favor of operations.
- 2.
Strategic overload which creates bottlenecks, costs, and slippages.
- 3.
Strategic incompetence which in addition to costs and slippages produces unrealistic and suboptimal strategies.
This last component of systemic resistance needs to be discussed further—a matter to which we now turn our attention.
Resistance and the Capability Gap
Comparison of Capabilities
As discussed, the pure operating and strategic behavior are extremes of the range of behaviors observable in practice, which range from incremental reaction after the fact to creation of novel products, technologies, and demands. Between the two extremes, we have defined several intermediate levels of progressively increasing aggressiveness of behavior. As you will recall, for every level of aggressiveness there is a distinct strategic capability which gives best support. Low aggressiveness is best supported by management capability which filters out radical changes, places high reliance on historical experience, and which is introverted—focused more on the internal management than on the relationship to the environment. As aggressiveness rises, the successive capability profiles are more receptive to change, more skillful in managing it, more open to the environment.
Matching triplets—aggressiveness and responsiveness with turbulence which optimizes a firm’s ROI
Turbulence level descriptor | Repetitive | Expanding | Changing | Discontinuous | Surprising |
|---|---|---|---|---|---|
Stable | Reactive | Anticipatory | Entrepreneurial | Creative | |
Strategic aggressiveness | Change based on precedents | Change based on experience | Incremental change based on extrapolation | Discontinuous new Strategies based on observable alternatives | Novel, Strategies based on creativity |
Responsiveness of general management capabilities | Stability seeking | Efficiency seeking | Market driven | Environment driven | Environment creating |
Environmental turbulence levels | 1 | 2 | 3 | 4 | 5 |
The left-hand column of the figure shows pure operating behavior in which no strategic change takes place. This is optimal for the stable environment. As the turbulence rises, so does the aggressiveness of the strategy; and the supporting capability becomes increasingly change-seeking and open to the environment.
A strategy-capability match will result in optimal behavior and, therefore, will not contribute to the resistance. When a mismatch occurs, resistance will rise in proportion to the degree of mismatch.
During the process of strategy change, resistance will arise whenever the change is planted into an unready ground, that is, whenever the change in strategy outpaces the accommodation of the managerial capability. If, after the new strategy becomes operational, there is a residual mismatch or imbalance of capability, resistance will cause chronic ineffectiveness of the new strategy.
- 1.
Systemic resistance will occur whenever strategic aggressiveness and capability are mismatched.
- 2.
Systemic resistance will occur during a change in strategy if development of capability lags behind the development of strategy. The resistance will be proportional to the gap between the two.
- 3.
Systemic resistance will occur whenever the components of capability are mismatched to one another.
Combining capability and capacity effects on systemic resistance
Change in Statergy | Small | Large |
|---|---|---|
Change in Stategic Budget | ||
Small | Low resistance | Incompetence resistance |
Large | Overload resistance | Both incompetence and overload resistance |
Resistance-Inducing Sequence
Steps in resistance-inducing sequence
The introduction typically starts with appointment of a corporate strategic planner ; development of a calendar and sequence of events, preparation of planning formats and procedures; and launching of the planning process, usually by means of a one-day seminar involving managers who are expected to participate.
As the Fig. 22.2 illustrates, this causes confusion and poses threats to the existing power structure and to individuals. Much of this is due to a combination of lack of understanding, lack of planning competence on the part of the involved managers, and anxieties about the impact of planning on the organization. The result is a high-level of both systemic and behavioral resistance.
Frequently, the first problem to surface from the welter of confusion is that good profit-making managers are not necessarily good strategic planners . They need to learn the purposes, the concepts, the terminology, the techniques of analysis before they can intelligently fill the planning forms. Once this deficiency is uncovered, usually through the poor quality of submitted plans, training is organized as a remedy.
Once the managers have acquired planning know-how, they begin to complain about what IBM has labeled the GIGO (garbage in garbage out) phenomenon: The information necessary for strategic decisions is lacking, and managers complain about having to invent meaningless facts and figures. Measures are next taken to develop a strategic database through environmental surveillance , forecasting , impact analysis , etc.
By now, planning may be on its third annual cycle, and it is increasingly perceived that the successive cycles tend to be ‘paralysis by analysis ’: plans are made but, mysteriously, the new strategies do not find their way to the marketplace. This leads to a belated recognition that the operating implementation and control system tends to sidetrack and reject strategic activity.
As mentioned earlier, planning is usually introduced as an extracurricular activity into the lives of already busy managers. After four or five cycles of planning, it is recognized that this activity is highly time-consuming, and may consume as much as seven months out of the year. It becomes evident that managers are getting ‘planning fatigue.’
After adequate capacity for strategic work has been provided, it is typically discovered that, since the inception of planning, the reward and incentives system has remained unchanged. Or, it may be discovered that the planning system and the organizational structure are in conflict, a situation which often occurs whenever strategic planning is introduced on top of a functional structure.
After the fifth or sixth planning cycle, powerful groups and individuals, who continue to be threatened by planning, but have been biding their time, begin to use the planning fatigue to squeeze planning out of the organization. It becomes clear that a realignment of the power structure is necessary in order to assure continued survival of the new system.
Ansoff’s repeated experiences in observing the reactions of battle-scarred planners as outlined in the ‘Steps in Resistance-inducing Sequence’ lead him to state that ‘the sequence presented is not as much of a caricature as it may appear to uninitiated readers.’
Thus, the historically typical introduction of planning has been, as the title of the figure suggests, through a resistance inducing sequence : A partial systemic change is imposed on the firm. It triggers behavioral resistance. The cause of the resistance is diagnosed as a systemic deficiency. The correction of the deficiency triggers new behavioral resistance and a new systemic change.
In the process, the system may not survive in the organization. A typical point of demise is the inability of top management to resolve the paralysis by analysis . This occurs because the operations implementation system, which is typically hierarchical and incremental with respect to past experience, cannot handle non-hierarchical, non-extrapolative, and high-risk strategic decisions.
Motivating Change Sequence
Understanding of the causes of the behavioral and systemic resistance, we now construct an alternative sequence which, instead of generating resistance to strategic planning, minimizes it throughout the process.
- 1.
A change in strategy which introduces new products and markets.
- 2.
A change in the systemic competence which includes systems, structure, skills, and knowledge.
- 3.
A behavioral change which includes norms, perceptions, values, models of the world, and distribution of power.
Resistance and sequence
If changes in systems are delayed until after strategy is in place, both systemic and behavioral resistance will persist throughout strategy introduction.
As systems are changed during the second phase, behavioral resistance will persist, and will not start to drop off until the third phase, when attention is turned to culture and power structure.
If, as in many historical cases, the third phase is neglected, and culture and power are not given attention, behavioral resistance will persist. As we shall learn in the next section, continuing application of power will be necessary if the new strategy and systemic arrangements are to stay in place.
If, as frequently occurred in the past, top management relaxes its vigilance after phase two, the behavioral resistance begins to erode the strategic gains and may result in a rollback of the entire strategy.
Thus, we can refer to strategy → systems → behavior as the maximum resistance sequence .
The lower part of Fig. 22.3 shows the opposite behavior → systems → strategy sequence. As the graph shows, by making behavioral changes before the systemic, management can delay the systemic resistance. After the behavioral acceptance is gained, and systemic competence is in place, implementation of strategy encounters no resistance. Thus, behavior → systems → strategy is the minimum resistance sequence.
Steps in change-motivating sequence
Attractive as it may appear, the minimum sequence has an obvious drawback; the implantation of strategy is delayed until after the behavioral and systemic changes have been made. By contrast, the maximum resistance sequence changes strategy in the shortest possible time.
This explains the importance of the second step in the resistance diagnosis . In a practical situation, the choice between the two sequences will have to be made as a function of the urgency of the strategic challenge posed by the environment.
But the choice does not have to gravitate to either extreme. As an example, while developing a power base and a mentality which will support and encourage change, it would also be possible to begin development of both the capacity and skills for planning. An examination of Fig. 22.4 suggests that it is possible to follow parallel paths which will be mutually reinforcing, thus substantially reducing the total time required. The choice of how much should be done in parallel will depend, on the one hand, on the urgency of the external change, and, on the other, on the energy and capacity which the management can devote to the process. We shall discuss this parallel resistance-reducing sequence further along in this chapter.
Resistance and Power
In many organizations, it is rare that all of the behavioral resistance to discontinuous change can be converted into positive support of change. Typically, this only occurs, as previously mentioned, when an organization is in a survival crisis and everyone rallies around a change which promises salvation. Yet, it can also occur when a charismatic leader fires everyone’s imagination by a vision of a ‘promised land’ or conquest of ‘a mortal enemy.’ Under most other circumstances, even after resistance has been reduced to a minimum, there will be points (individuals and groups) of nonreducible resistance against change.
Therefore, the change-initiating group must muster enough power to overcome the residual behavioral resistance. The amount of power (or strength of authority) that needed will be proportional to the level of resistance to be overcome.
If the power is insufficient to launch the process, the change will never get off the ground. If the ‘power chips’ get used up in the process, the change will fizzle out during the process.
When resistance to planning was first encountered in the early days of strategic planning, the need for power to overcome the resistance was quickly recognized. A practical conclusion was reached that, to succeed, strategy change must have the wholehearted support and attention of top management. But this power was used to impose the new strategy on the firm and not to reduce the behavioral resistance. As a result, the managerial pressure and support of the new strategy had to be maintained continuously if the strategy was to remain in place. In many cases, after several years of active support, the attention of top management shifted to other pressing concerns. When this occurred, cultural and political opposition resurfaced, and succeeded in ‘rolling back’ the new strategy, or suppressing the new strategic planning system.
Less frequently, when top management remains firmly committed to planning for a long time, a process of cultural and political adaptation gradually takes place: pro-planning managers replace those who opposed it, a new culture supportive of the planning emerges, individuals learn to live and be comfortable with the new view of the world. When this occurs, the new strategy and its supporting capabilities become gradually institutionalized. But this is a slow process which may take five to ten years.
Designing Systemic Features into the Plan for Change
- 1.
Provide a dedicated capacity for the change process by budgeting for it, assigning specific shares of individuals’ time, and programming capacity buildup.
- 2.
Integrate management development programs into the change process. One way to do this is to preface the change with a training course. A more effective way is to divide the change into distinct steps (modules) and preface each module with a training experience.
- 3.
To the maximum extent possible, use the sequence: behavior development → systemic buildup → strategic action.
- 4.
Stretch the duration of change to the longest possible period which will still assure effective and timely response to the environmental challenge.
Summary
Systemic resistance to change occurs when operating and strategic activities within the firm compete for organizational capacity. Unless special provisions are made, operating work tends to preempt the strategic work. Systemic resistance also occurs when organizational competence is unsuited for supporting the strategic aggressiveness of the firm.
Systemic resistance will be proportional to the mismatch between the available and required strategic capacity , and to the mismatch between the aggressiveness of the new strategic behavior and the existing systemic competence. Systemic resistance will be inversely proportional to the speed with which change is introduced.
A third source of both systemic and behavioral resistance is the sequencing of the steps during a change. When the sequence strategy systemic competence behavioral modification is followed, the resistance will be maximal. When the sequence is reversed, the resistance is minimal.
In most cases, the launching platform will reduce, but not eliminate resistance. A combination of behavioral and systemic resistance will persist through the change process. Therefore, sufficient power must be mustered to assure successful completion of a discontinuous change. The duration of the change should be matched to the available time, adequate capacity should be provided, provisions made for training managers in strategic analysis.
Exercises
- 1.What is a strategic budget ?
- a.
What should be the principal categories of a strategic budget ?
- b.
What should be the process of strategic budgeting?
- c.
What principal factors should determine the size of a strategic budget of a firm?
- d.
In the absence of a formal strategic budgeting process, how is the de facto strategic budget determined in a firm?
- a.
- 2.What are the key ingredients of strategic capacity ?
- a.
How should the volume of the needed capacity be determined?
- b.
What are the ways of protecting strategic capacity from encroachment of the operating activities?
- a.
- 3.
How could you go about determining the time available to the firm for effecting its response to a strategic discontinuity?
- 4.
Using a selected organization, design a graphical presentation of the cultural/political map of the firm. What information should be presented on the map? How would you use the map?