Published by The Royal Bank of Canada

Changes in Management

In the dynamic business world of today,the only sure thing is that change will beconstant and rapid. To capitalize on thefuture, organizations must becomeadaptable from the bottom to the top...

[] Someone once described modern management asa "Chinese baseball game." In this mythical sport,both the ball and the bases are in motion. As soonas the ball is hit, the defending players can pick upthe base bags and move them to anywhere in fairterritory. The offensive players never know inadvance where they must run to be safe.

The metaphor refers to the terrific pace of changein business today -- not only in the way things aredone and organized within a company, but in themarkets and socio-political environment in which itoperates. When the reference points for doing bus-iness -- the bases -- are likely to move at any time,no manager can take the results of his or her actionsfor granted. This applies to anyone who might becalled a manager, from the chief executive officerof a multinational corporation, through the market-ing director of a regional firm, to the owner of acorner store.

The unpredictability which haunts businessdecision-making is not, of course, a new phenome-non. For years now, management experts have beendrumming out the message that the only thingmodern organizations can look forward to withabsolute assurance is rapid and continual change.Managers have been told again and again that they"have no choice but to anticipate the future, toattempt to mold it, and to balance short-range andlong-range goals," as Peter Drucker put it. On theface of it, this lesson has been well-received.

For instance, just about everybody in businessin the western world has recognized the power ofthe micro-computer to revolutionize administrationand production. Managers have rushed to re-equip

their units with the latest electronic equipment lestthey be handicapped in the competitive race. Unfor-tunately, many have let it go at that, on the mis-guided premise that to keep up with technologicalchange is to keep up with change in general.

In fact, the most technologically advanced com-pany can have all its reference points moved outfrom under it. Computerization brings no guaran-tee that a company in a completely different indus-try will not come up with a cheaper or better sub-stitute for its product; or that developments intaxation, tariffs, regulation or the availability offinancing will not shift first base into left field.

At the same time, no one in management thesedays wants to be thought of as being out of touchwith change; one has got to be "with it." Managerswill always tell you that they are highly consciousof trends in their industry and the marketplace.They know that they live in dynamic times, andthey feel that they are coping with change very well.

All too commonly, however, that is the most theyare doing -- just coping. Change creates problems,and managers are problem-solvers born and bred.They are ever ready to put out the fires whichchange ignites.

What they are not ready to do is anticipate andmold change, as Drucker suggests. They are lettingit happen to them, then reacting to it. By so doingthey are perpetuating the status quo, thus limitingtheir organization’s ability to make the internalchanges necessary to deal with unexpected develop-ments down the line.

Though problem-solving is an unavoidable partof the job, it is not really a manager’s main mission.

Managers are not supposed to solve problems somuch as avert them by identifying them in advanceand making sure that they never arise. The classicdefinition of a manager’s role is "to plan, organize,direct, control and co-ordinate," all of which implyforward thinking. That is the theory, anyway: Whatmanagers do in real life is another thing.

In his landmark study of how bosses spend theirtime published in 1975, Henry Mintzberg reportedthat the picture of a manager coolly sitting back for-mulating plans and putting them into effect islargely "folklore." Most of the executives whoseroutines he monitored had what, if it occurred inchildren, would be called "a short attention span."Whether by inclination or necessity, they acted likeStephen Leacock’s knight, riding off in all direc-tions. They "seemed to jump from issue to issue,responding to the needs of the moment," Mintzbergwrote.

Planning does not necessarilymean a company has a strategy

It is almost axiomatic that managers who con-centrate all their efforts on the here-and-now are infor some nasty surprises. They have their backsturned to the future, and the future is quite likelyto creep up and kick them in the pants.

"If a man take no thought of what is distant, hewill find sorrow near at hand" is one thing Con-fucius really did say. And sure enough, managementin North America and much of Western Europe hassuffered an ignominious blow over the past two orthree decades from the Japanese, whose culture hasendowed them with a long view of time.

Still, the Mintzberg-type managers are likely toprotest that they are not as shallow and short-sighted as he has made them out to be; that he mis-understood and underestimated them. Sure, theyspend a lot of time dealing with immediate problems-- does he expect them to let the house burn down?But they are also in touch with emerging develop-ments. They read their economic and market fore-casts. It’s not true that they pay no attention tolong-range strategy. They can show you their stra-tegic plans.

The flaw in this is that it is perfectly possible tohave strategic plans and yet not have a strategy.In the original military meaning of the word, to

practise strategy is to impose on the enemy condi-tions of battle of your own choosing. This meansdeploying your resources in such a way as to makethings happen to your advantage, which you obvi-ously cannot do if all your forces are tied up merelyholding the line.

According to the American managementauthority Milton C. Laurenstein, many large (andpresumably many more smaller) companies arefirmly bogged down in the present, even thoughthey are under the delusion that they are thinkingahead. They "grope for sound strategic policies,"but they are "seduced by whatever looks attractiveat the moment... They emulate other companiesthat seem to be doing well. And they hew to the con-ventional wisdom."

The conventional wisdom in this context decreesthat business tactics that have worked in the pastwill be equally effective in the future. In a broadersense, the conventional wisdom is what "everybodyknows." Thirty years ago, everybody in Hollywoodknew that people had to go out to a theatre to seea new big-budget movie. Everybody in the ladies’undergarment industry knew that women had towear garter-belts to hold up their stockings;leotards, later called pantyhose, were for balletdancers and little girls. Everybody in the footwearindustry knew that middle-aged people didn’t goaround in running shoes. These were -- or seemedto be -- demonstrable facts at the time.

Flexibility is the only de fenceagainst unforeseen developments

One way corporate leaders get caught off basein the Chinese baseball game is by relying too heav-ily on projections. As the word suggests, a projec-tion is an extension of what is happening at themoment into what is likely to occur some timehence. It is an imprecise tool, but it is all economicand marketing forecasters have to work with, shortof indulging in out-and-out crystal ball gazing.

And it’s impossible to think of everything: whoin the 1950s, for example, would have thought thatan ingredient in aerosol sprays might endanger theglobal ecosystem? Who could have guessed thattraditional activities like whaling and logging -- to

say nothing of seal-hunting off Canada’s coasts --would be hit as hard as they have been by the pro-test tactics of environmental vigilantes?

The primary defence a businessperson hasagainst such vagaries is organizational flexibility.Indian economist Purnendu Chatterjee has percep-tively placed this in the category of risk manage-ment; it takes time and money to hold yourselfready for changes that might never occur. Chatter-jee says that companies nowadays must be pre-pared to make "midcourse corrections" not only toevade the threats posed by change, but to capital-ize on the opportunities.

Participation is the keyto making internal changes

Putting a company in a position to respondswiftly to future developments means revising theorthodox managerial mind-set. "Proactive"managers must learn to see situations in terms ofpatterns and correlations instead of cause-and-effectreciprocations. They must look for inclinations andprobabilities rather than certainties.

Management consultants say that one methodof conditioning yourself psychologically to play theChinese baseball game is to keep asking, "Whatbusiness are we in?" Does your definition of yourbusiness fit all the present circumstances? Will yoube in precisely the same business next year, or theyear after that?

By keeping these questions in mind, a sufficientlyflexible management can make some timely transi-tions. For instance, an entrepreneur who got in onthe ground floor of the video rental business a fewyears ago could see that the field was becomingovercrowded for the size of the market he was in.But with more and more video cassette recorderscoming into use, there was a need for somebody torepair them. So he de-emphasized his rental busi-ness and began moving into the repair businessinstead.

That may be all very well for a relatively new andsmall operation, but how does one achieve flexibil-ity in a larger and more established one? Organiza-tions are susceptible to hardening of the arteries.They are made up of people, and people become setin their ways.

Employees tend to cling to fixed rules and fixedmethods, and over the years they develop vestedinterests. The changes needed within the organiza-tion to meet external change threaten their securityand self-esteem, especially if they are asked to learnnew tasks which they are not sure they can do. Inthis stressful state, their chief object becomes topreserve the status quo.

"The very essence of all power to influence liesin getting the other person to participate," HenryOverstreet wrote. Employees cannot be led to par-ticipate in a strategy for change if they feelalienated or if they are in a state of suspense as towhat is really going on. Management psychologistHarry Levinson has observed that when people aredeprived of information in an organization caughtup in the throes of change, rumours spread whichecho their feelings of loss, fear and anger. These caneasily be amplified into bitterness and paranoia ifmanagers do not identify with their units and letthem know that they are all in it together: "A goodmanager knows that people must feel their ties toeach other in times of change."

Among the chief failings of management at thisor any other time is an inability or disinclination tocommunicate with those below them in the struc-ture. "Without a free, full flow of information andideas up and down the organization there cannot beco-operation and understanding," as the Universityof Wisconsin’s Scott Cutlip wrote. Note that hephrased it "information and ideas." In seeking theco-operation and understanding needed to makeinternal changes work, employees at all levelsshould not only be informed of, but be made activeparticipants in, the planning process.

The front-line troops knowwhen changes are in the air

In small organizations, such participation mayentail including virtually the entire staff on the plan-ning team. In larger ones, representatives of therank and file should be closely consulted to ensurethat the senior people who make the decisions areaware of the implications of those decisions fromthe ground up. Management experts caution thatplanning for change should start "from where actu-ally we are,"rather than from some wishful self-image. Obviously, management will best be able tore-position an organization to deal with change if

it has full access to the unadorned facts and a graspof all the relevant details. These can only come fromthose most intimately concerned with the variousaspects of the organization’s operations.

Similarly, when external changes are in the air,the lower-level people are often the first to knowabout them. The sales person on the road, the clerkbehind the counter, the foreman on the floor -- theyare the ones who talk to customers, suppliers,labour representatives and others in the industry.They hear about new competitive products andservices and about how corporate policies are per-ceived by the staff and the public. If they are well-motivated, they can serve as an early-warning sys-tem to eliminate surprises and a source of sugges-tions on how to head off potential problems. If theyare not well-motivated, they are only too happy tolet the big bosses sink or swim by themselves.

Victories in the marketplacewill go to the adaptable team

They are commonly referred to as "front-linetroops," who can tell what is going on in the enemycamp while the generals have only maps to go by.The writings on the management of change are fullof such military analogies. This is understandable,because there are so many similarities between mili-tary and business matters. The classic strategic the-orist Karl Von Clausewitz pointed out that bothbusiness and war concern themselves with "a con-flict of human interests and activities." Both aresubject to chance, and in both, much is hidden fromthe players. Leo Tolstoy might have been writingabout management when, in War and Peace, heremarked that military staffs making battle planswere dealing with an undertaking in which "the con-ditions and circumstances are uncertain and cannever be known."

In Tolstoy’s day, generals manoeuvred theirarmies in enormous blocks, seeking to gain the posi-tional advantage on open battlefields. Firing wasdone in mass volleys of hundreds of muskets at atime. The men in the ranks usually had no idea ofwhat the objectives were. Junior leaders were not

expected to do much more than hold the troopssteady when they were on the defensive, or urgethem forward in charges. They and their men werelittle more than pawns in the high command’s granddesign.

As weaponry and tactics developed over theyears, armies were split up into smaller and smallerunits. In World War II, grand strategies like theAllied invasion of North West Europe were essen-tially carried forward through a succession ofclosely-contested engagements between parties assmall as platoons. The leadership qualities of thejunior and non-commissioned officers became muchmore important than they had been when warfarewas less fragmented, specialized and complex. Nolonger did the obedience of the armed mass countfor most in battle, but the intelligence, initiative,and innovative ability of the men on the spot.

War became the province of well-motivated andwell-informed individuals who could work in teams-- men who knew how to do their particular jobs,and knew how to do them together. The mobile andfluid nature of combat called for leaders who couldthink on their feet. The old military maxim, "it’sa poor plan that can’t be changed," took on adynamic new meaning. When plans had to bechanged suddenly, everyone up and down the chainof command had to adapt to the new circumstancesmore or less instantly. This meant that they all hadto be apprised of what was going on.

"Adaptability is the law which governs survivalin war as in life," wrote Sir Basil Liddell Hart, themost respected of modern military authorities.Replace the word "war" with "business" and youwould have an excellent motto for managementtoday. The organization that is able to adapt toshifting conditions from the bottom to the top willbe the one that wins the victories in the market-place. Adaptations are hard for people to make.They will only be made smoothly by those who pitchin willingly because they feel that they are essen-tial members of a team, and are recognized as such.