"Why Change Succeeds:" an Organizational Self-Assessment

Article excerpt

Abstract

This paper seeks to explain the underlying reasons for the success or failure of 11 corporate-level change initiatives in a large international pharmaceutical company. A research team comprised of internal and external specialists interviewed 72 employees who were involved in the implementation of at least 1 of the company's key change initiatives during the past 15 years. Results revealed that the success of change initiatives was largely determined by senior leaders' ability to utilize both formal and informal mechanisms that were culturally appropriate to the organization. A process for investigating the effects of a company culture on effective change implementation is discussed.

Introduction

Learning how to effectively implement organizational change is one of the most rewarding challenges of an organizational consultant. In fact, there have been myriad studies that outline these challenges in detail and offer potential strategies for successfully implementing organization change (e.g. Beer, 1990; Kotter, 1996, Ulrich, 1990.) Despite the insightful contributions offered by this body of knowledge, many of these recommendations are at such a general level that it is difficult for practitioners to translate these insights into change initiative strategies that consider the unique history and current makeup of an organization.

In an effort to move beyond the limiting factors associated with external change initiative research, the leadership of Eli Lilly and Company, a $14B pharmaceutical company headquartered in Indianapolis, Indiana (USA), recently undertook a study to identify the underpinnings of their own challenges with large-scale change prior to introducing a new corporate initiative. The purpose of this article is to provide O.D. practitioners with a process for investigating the impact of a company's culture on effective organizational change implementation.

History of Change at Eli Lilly

By the mid-90's, Lilly was a highly competitive global firm most noted for successful introductions of insulin and the world's first SSRI1 antidepressant, Prozac. Built on a string of breakthrough pharmaceutical successes dating back to the 1860's, Lilly had attracted the best scientific minds in the world. A unique company culture evolved, characterized by bright, independent people governed in a management style based more on trust than on control.

By the late 1990's, pharmaceutical companies were under pressure to reduce their cost structures. Lilly's CEO decided to pursue Six Sigma as a corporate-wide solution to examine its own cost structure. However, knowing that implementing Six Sigma would be yet another in a series of challenging changes for the company, the CEO determined it would be critical to learn from the company's past efforts at instituting large-scale change. To accomplish this task, the CEO, commissioned a study led by Lilly's internal organizational effectiveness (OE) unit.

Methodology of the Change Effectiveness Study

The OE practitioners engaged in a partnership with the William G. Dyer Institute for Leading Organization Change2 at Brigham Young University in order to ensure objectivity and to obtain research expertise. The research team used ethnographic research methods for collection and analysis of data, examining the totality of data within the expressed culture of Lilly. Patterns and relationships between the data elements were studied, producing both quantitative analyses and a simple qualitative model.

Project Selection for the Study

The study team selected 11 major corporate projects that met the following criteria:

* An initiative at the corporate or major division level

* Significant size and scope (large project team and/or high-level project leader; substantial change intended)

* Broad population impact (all or a majority of employees in the corporation, or a large component like R&D)

The change initiatives spanned almost 15 years of Lilly history and included process improvement programs, a major organizational realignment to a team-based R&D structure and the introduction of a modern performance management system, among other changes.3

Participants in the Interviews

To be interviewed for the study, an employee needed to have been either significantly involved in the initiative as a project leader or key team member or insightful as to its administration and impact. Seventy-two people were interviewed on site at Lilly corporate headquarters (some involved teleconference calls to others sites, including international locations).

At the time of their original participation in one of the change initiatives, interviewees held positions at various organizational levels. After passage of time, however (up to 15 years since the start some projects), interviewees now occupied the more senior levels in the company:

* 23 senior managers (president, vice president, executive director)

* 38 mid-managers (director/advisor, manager)

* 11 associates (associate, team leader, etc.)

Interview Questions

Structured interviews followed a questionnaire which contained both quantitative (scalar) and qualitative (open-ended) questions. The interviewee was asked a total of 45 questions intended to gauge his or her perceptions about 1) one unique change initiative the participant was involved in and 2) their experience with Lilly corporate change initiatives in general. Examples include:

* In change project "x," looking back, what were the top enablers and barriers that affected accomplishing the initiative's desired results?

* Reflecting generally across Lilly corporate change initiatives, does the nature of Lilly's type of business affect any one of the stages of implementation (described) more than the others? If yes, how?

Dyer and Lilly researchers conducted the interviews over a 6-week period in the summer of 2004. The entire study, including the final reporting of data, took seven months to complete.

Data Analysis

Data were coded, calculated and categorized by theme. A significant catalog of verbatim quotes was also captured to aid in reporting of results. The research team then met together for three days to discuss patterns and possible meanings of the data within the context of interviewee comments, relevant research literature, internal Lilly documents and historical company information. As shown in Figure 1, a model was created to depict the interplay of the interview data.

Study Limitations

The research team originally intended to interview "recipients" of the changes in addition to project team leaders or members. A few recipients were interviewed during the beginning stage of this study, but scheduling challenges and a growing size of leader/team member interviews caused the research team to abandon the idea of interviewing subjects solely identified as recipients. Compensating somewhat for this adjustment is the fact that all eventual 72 interviewees were also asked to comment on other corporate change initiatives they had experienced during the recent past. In many cases, this input served as a proxy for "recipient" feedback.

Another limiting factor is that the earliest initiatives began 15 years before the study's inception. Institutional and individual memories may have faded over such a long time period, potentially diminishing the validity of some comments. However, in general, patterns reported for earlier initiatives were consistent with the patterns reported for later initiatives.

Findings

Where Change was Easy, Where Change was Difficult

As part of each interview, participants were presented with nine variables that are commonly associated with change initiatives (Table T). Respondents were asked to reflect on all the change initiatives they had experienced at Lilly and to describe which aspects of these initiatives they felt that Lilly did best generally, and those that needed improvement.

Figure 2 shows participants' perceptions of where Lilly did well in introducing change and where initiatives typically struggled.

It did not surprise Lilly leaders to learn that they were adept at developing solutions and creating business rationale to support them. However, a much different picture emerged when it came to implementation issues such as scope, resources and timetable. When asked which of the variables would impact future change efforts most positively if improved, participants stated, "Articulating expected results in advance." Apparently, it was not customary to declare specific outcomes at the beginning of an initiative but rather to start with a general mandate and proceed from learning to learning. While this is good practice in certain scientific laboratory processes, it created a culture of non-accountability for implementation of change efforts. Given Lilly's culture of high autonomy and management by trust, people did not feel pressure to rigorously set or account for predeclared outcomes.

To understand what was underneath this trait of non-accountability, true insight came when the qualitative results of the study were analyzed.

When Change Succeeded

It became apparent to the researchers that Lilly's unique culture had affected the relative success or failure of each initiative. Analysis also helped to pinpoint where in the change process the initiatives lost momentum and were unable to sustain energy to a successful conclusion.

Interview data indicated that, due to Lilly's culture of high intellect and autonomy, employees were constantly looking for"signals"to validate whether an initiative was worth their time-at least enough time to create a sense of personal accountability. These signals would be noted when certain formal and informal mechanisms were employed to manage the change. These mechanisms, in effect, were "signal pathways"between leaders and employees.

According to the study, three mechanisms had to work together to create signals that would yield personal accountability: 1) senior leader involvement, 2) senior leader advocacy through informal channels appropriate to the culture, and 3) senior leader employment of formal mechanisms using management processes and structure (see Figure 2).

Senior Leader Involvement

The Dyer Institute reported that more than in other corporations they had studied, Lilly employees looked first to see if a senior leader endorsed the change. If a senior leader with authority and credibility was not associated with a project, employees typically would not give it sustained attention. They had learned from their experience that if an initiative was not tied to a significant source of authority at the very beginning, it would often lose momentum and eventually come to a halt.4 If the signal of senior leader involvement wasn't seen, employees would not commit their scarcest resource-their time-to a project that predictably would not succeed.

Senior Leader Advocacy through Informal Channels Appropriate to the Culture

Senior leaders, once engaged, had two other mechanisms they could utilize. The first was predominately a cultural mechanism requiring the leader to use relationship skills and knowledge of the informal organization to muster support for the cause. They did this in three ways:

1. Coalition-building. Harvard's John Kotter (1996) rightly observed that the power of single leaders extends only so far-they have to rally support of other critical leaders if a change is to succeed. A"linked-arm"coalition was a necessary signal to Lilly employees that their upline leader was committed and that he or she expected their full participation.

2. Communicating. Lilly leaders are not afraid to "go public"in front of their employees. Sincerity, enthusiasm and intellectual prowess are hallmarks of Lilly leaders, and, as a result, employees expect to see them using these skills in advocating change and inviting them to become involved.

3. Influencing the informal system. Effective leaders know what it takes for change to succeed in their own organization. Knowledge of how things actually work through more informal channels is a prerequisite for achieving results as well as promotions. Lilly employees expect their leaders to use relationship and political skills to advocate for change, such as generating supportive coalitions and overcoming barriers.

Senior Leader Employment of Formal Mechanisms using Management Processes and Structure

In addition to persuasively influencing change through the culturally-rich informal system, the study showed that effective leaders also utilized formal processes and structures to reinforce a change. This included such things as appointing credible leaders, resourcing the project with needed talent and budget, installing up-front metrics with formal project management, etc. When employees saw these signals in addition to signs that a senior leader was influencing the informal organization, suddenly their attention was secured.

Some initiatives began with senior leaders announcing the changes through email or telephone broadcast messages, but the efforts were not additionally supported with resources, project teams, metrics, project management and other similar formal mechanisms/Our leaders thought that communication equaled implementation," commented one interviewee. Another said, "We have a 'field of dreams' type of approach; a lot of 'announce it, they will come.'"

Accountability

To complete the description of all elements in Figure 1, when the three signals (senior leader involvement, senior leader advocacy through informal channels, and senior leader employment of formal mechanisms) were perceived, accountability was created to implement and sustain the change. Then people would implement the changes through established (or new) work processes to obtain the desired results.

One noteworthy point is that once the mechanism of senior leader involvement was seen by employees, it was the additional effort of utilizing both formal and informal mechanisms that predicted success. If only one mechanism was utilized to the exclusion of the other (such as implementing formal Six Sigma tools without developing a coalition of leaders) then sustainable accountability and action would never develop. A balance of effort was required (the smaller "Both" arrows in Figure 1).

Interestingly, as senior leaders used both methods, accountability increased for them, as well. Perhaps by using both formal and informal mechanisms, senior leaders committed themselves to the entire change process. The accountability arrow then extended in two directions: obtaining the commitment of leaders as well as employees.

Balanced Effort Brings Success

Non-technical Lilly initiatives often failed to gain traction because senior leaders would appropriately advocate in culturally-attuned ways but then depart the scene. They believed that merely inviting people to the dance was sufficient to get people'Onto the dance floor."But when no one moved into action, eventually the music slowed and the initiative died. One vice-president in a moment of insight remarked, "We have conditioned our employees to ignore us!"

In these cases, it could be said that there was an over-reliance on the culture characterized by informal personal relationships and under-reliance on formal mechanisms.

However, technical change initiatives (like process improvement programs) suffered the same fate if leaders did not also influence the informal organization. An over-reliance on formal mechanisms to induce change resulted in a similar degree of non-accountability to implement.

A comparison of the 11 corporate initiatives revealed that only those which utilized both formal and informal mechanisms in an appropriate balance, as well as having a senior leader visibly involved, showed high degrees of success.

Conclusion

Organizational Self-Assessment

Although these insights may apply to other organizations beyond Lilly, the real value of the study for others may be in its internal-looking design. Organizations often turn to outside experts and studies (like this one) in search of clues for implementing change successfully. Although these experts and studies can provide useful insights when formulating hypotheses, the most powerful answers may already lie within one's own organization, ready to be tapped.

Summary of Study Results

This study showed Lilly leaders that they can improve the probability of success in implementing change initiatives. In addition to identifying areas where change historically was weakest (Figure 1), it perhaps, more importantly, described why some past initiatives had struggled to achieve intended results.

In Lilly's own culture of high personal independence and a trusting management style, it was found that three mechanisms were necessary for accountability to be created:

* Senior leader involvement

* Senior leader advocacy through informal channels appropriate to the culture

* Senior leader employment of formal mechanisms using management processes and structure

Of significant importance, however, was the finding that both informal and formal mechanisms had to be used. An over-reliance on one to the exclusion of the other diminished accountability to implement.

Organizational Receptivity and Value

When the study results were reported within Lilly they had immediate credibility and impact. First, the employees quoted were well-known in the corporation. Many of them have risen to levels of prominence and they described challenges with past change initiatives in terms that Lilly employees could recognize.

Secondly, the empirical data, the simple model, and the verbatim quotes rang with organizational authority. It was leadership's own data, their own voice. They had looked into a mirror that showed their own reflection more clearly. The study built a foundation for better change within Lilly:

* Six Sigma was launched with a balanced emphasis on both informal and formal factors. The CEO was tightly in control of the effort and named a key figure to lead the effort. He also convinced his direct-reports (the coalition) of the necessity of going forward.

* A set of change tools was created to support the model (Figure 1).These included simple diagnostic instruments to highlight risk factors in ongoing change efforts and "job aids" that provided examples and templates for such things as stakeholder analysis, sponsor development, impact assessment, etc.

* The tools were deployed through training courses for Six Sigma black belts and other employees involved in change efforts. A community of practice was established in the corporation which promoted effective use of change techniques that work within the Lilly culture.. .even as employees continued to change their culture for the better.

Increased Confidence in Change

The study findings have been used by Lilly leaders to provide stronger management of other change initiatives. "Answers that matter" (Lilly's brand motto) about change management are found because risk factors are spotted early and either prevented or rectified. Perhaps most importantly, Lilly leaders feel more optimistic when engaging in initiatives to improve the quality of life for patients, healthcare providers and employees alike. One seasoned leader said:

I'm just stunned. You have explained why our past change initiatives have failed (some of which I have been a part of), how we can identify similar risks in the future, and you have given us tools to close those gaps.

Simple and practical insight about how change effectively happens in any organization can be learned from past efforts. This is a process which can be repeated by any organization willing to take a good look in the mirror.

[Sidebar]

Author's Reflection

The Organizational Effectiveness (OE) department at Lilly consists of five individuals. The OE department is at corporate headquarters in Indianapolis, Indiana, and reports to the Executive Director of Leadership and Organizational Development. This person in turn reports to the Senior Vice President of Human Resources who reports to the CEO.

One potential challenge facing this study from the very beginning was senior management acceptance of the findings. We anticipated that the study would reveal deficiencies in the leadership and management of past initiatives and felt that this could cause some anxiety for some senior leaders.

We were fortunate that the introduction of a corporate-wide Six Sigma program provided a perfect foundation for introducing this study. Senior leaders were most interested in ensuring that the next major initiative was set up for success, minimizing the risk of failure. Any sensitivity that they might have held prior to the study was actually converted into support. Timing and positioning of our research study was critical.

Having the vantage point of an internal consulting group helped us immensely. Not only could we scope the potential dimensions of the study appropriately given our knowledge and history of the organization, our awareness of the broader portfolio of current and emerging corporate initiatives allowed us to time the introduction of the study wisely.

Having a trusted internal consultant involved in most of the interviews quelled or at least tempered any fears that the data might be used in a way that could cause damage. At the same time, partnering with an external research team from a University brought credibility and assurances that the findings would be objectively analyzed and reported.

We believe that other internal consultants can benefit by 1) patiently working with their organization's existing interest in and timing for changes, and 2) collaborating with research partners who are perceived as neutral. External consulting firms who leverage internal consulting resources will have a decided added advantage.

The Corporate Change Initiatives Study has had major impact on how we view large-scale change at Lilly. Bom initially as strategic grounding for Lilly's Six Sigma effort, the study's findings continue to guide our thinking on important change initiatives. It has had significant relevance for some leaders who-often for the first time-understand how our unique culture impacts change. And it gives them practical insight to increase the probability of success of change efforts. The study has also had global applicability. Our international employees confirm that the variables identified can be seen in almost all our geographies. This study has been an important stepping-stone in our path to continually improving organizational results in behalf of our patients and customers.

David S. Kinard, Executive Director, Leadership and Organizational Development, Eli Lilly and Company

Endnotes

1 Selective Serotonin Reuptake Inhibitors

2 The study team from the William G. Dyer Institute for Leading Organizational Change at Brigham Young University included:

Kate Kirkham, Ph.D., Professor of Organizational Behavior, Marriott Graduate School of Management, Brigham Young University. Executive Director of the William G. Dyer Institute for Leading Organizational Change.

Kathryn R. Wardle, Principal, the Wardle Group. MBA, Brigham Young University.

Spencer Harrison, doctoral candidate, Arizona State University. MBA, Brigham Young University.

Ryan M. Harrison, Employee Development & Executive Consulting, The Harrison Group. MBA, Brigham Young University.

3 The range of initiative types studied included:

* Cultural transformation (2)

* Process improvement (3)

* Customer orientation

* Performance management system introduction

* Team-based organization structure redesign

* Major information technology introduction (ERP)

* Innovation incubator for new research and business methods

* Introduction of a new corporate brand

4 While the presence of a leader-sponsor is typically necessary for most organizational change of significance, other firms in the researchers'experience seemed more able to mobilize action at mid- and lower-levels without needing to have the senior-most leaders visibly standing behind every change. In fact, in some companies senior leaders seem to prefer that initiative for change be taken at more junior levels. In these cases, mobilization of the troops and carrying a change through to completion is seen as a test of upward potential for managers.

[Reference]

References

Beer, M., Eisenstat, RA & Spector. B. (1990, November/ December). Why change programs don't produce change. Harvard Business Review, 158-166.

Kotter, J.P. (1996). Leading change. HBS Press.

Sirkin, H.L, Keenan P., & Jackson, A. (2005, October). The hard side of change management. Harvard Business Review. (Online Version).

Ulrich, D. & Lake, D. (1990). Organizational capability: competing from the inside out. Wiley.

[Author Affiliation]

Bill Cowley, Eli Lilly & Company